Lana Dolyna, EA Tax Consultant
You won’t get a Section 199A tax deduction for your cannabis business.
But some of the other tax reform changes may make the C corporation a more attractive choice of entity than before (yes, really!).
Let’s look at an example. Say the cannabis business has the following financials:
Cost of Goods Sold
If the business is an S corporation and you are in the 32 percent federal income tax bracket:
If the business is a C corporation:
Because Section 280E creates “phantom” income for tax purposes (that is, the income doesn’t exist in real cash), it makes the S corporation and other pass-through entities less attractive overall for the cannabis business.
As you know, you should always run the numbers when comparing choices of business entity, to ensure you are making informed choices. If you would like our help running your numbers, please schedule your free strategy session by clicking the green “Schedule Now” button now.
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