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.
Let’s look at an example. Say the cannabis business has the following financials:
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.
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Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.