As we approach the end of the year, cannabis businesses have a unique opportunity to maximize tax benefits—despite the ongoing challenges posed by 280E. While the lack of reform continues to limit our ability to deduct many expenses, there are still smart strategies to reduce your tax burden and prepare for a strong start to the new year.

Here’s a breakdown of what you can do to leverage your direct expenses and minimize your tax liabilities:

What Can You Write Off Without 280E Help?

280E prevents cannabis businesses from deducting many ordinary business expenses. However, certain direct expenses tied to the cost of goods sold (COGS) are still deductible. These include:

1. Raw Materials & Packaging
• Stock up on child-resistant packaging, labels, and other supplies directly tied to your product. If you purchase these items before December 31, they can qualify as deductible expenses for this tax year.
2. Manufacturing Costs
• Any equipment, tools, or supplies directly used in the production of your products are fair game. For example, sealing machines or molds for custom packaging fall under this category.
3. Inventory Costs
• If you’re holding inventory or purchasing materials to build up your supply chain, these expenses can also be deducted.
4. Employee Wages for Production Staff
• While administrative wages aren’t deductible, the wages of employees directly involved in cultivation, manufacturing, or processing may qualify as part of your COGS.

 

Why Make Purchases Before Year-End?

1. Immediate Tax Benefits
• Purchases made before December 31 can be included in your 2024 deductions, reducing your taxable income and softening the blow of 280E.
2. Tariff Increases Are Looming
• With potential tariff hikes coming in January, now is the time to lock in your orders for imported goods like tin or child-resistant packaging. This could save you significant costs in the long run.
3. Avoid Supply Chain Delays
• The beginning of the year is often fraught with shipping delays and price increases. Purchasing now ensures your operations start 2025 on solid ground.

 

How to Prepare for 2025 Without Relief

While we can’t count on 280E reform or safe banking legislation just yet, we can focus on building a resilient business. Here are a few steps to consider:

• Plan for 2025 Purchases: Look ahead and budget for large expenses you know will come up.
• Invest in U.S.-Made Solutions: Whenever possible, explore domestic options to reduce reliance on imports and tariffs.
• Consult a Tax Professional: Work with a cannabis-savvy accountant who understands 280E and can help you navigate deductions for your business.

 

Key Takeaway

The cannabis industry may still face uphill battles, but smart year-end planning can give your business an edge. Focus on deducting direct expenses, investing in critical materials, and planning ahead to minimize costs in 2025.

Don’t let 280E hold you back—be proactive and take control of your tax strategy now.

At MSN Packaging, we provide more than just packaging – we’re your partner in bringing margin-saving ideas to life.

Need help sourcing cost-effective packaging or preparing for the year ahead? Let’s connect and make sure your business is ready for success in 2025.

 

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