Big news in the cannabis tax world last week, and yes, this one actually matters. President Trump signed an executive order directing the Attorney General to reschedule cannabis from Schedule I to Schedule III. This is real, it’s happening, and it will significantly change the tax landscape for cannabis businesses.

What does this mean?

Once the final rule takes effect (likely Q1–Q2 of 2026), IRC §280E goes away for cannabis businesses. That means you’ll finally be able to deduct normal business expenses like rent, payroll, marketing, insurance, and overhead; expenses that have been crushing cash flow for years. We expect effective tax rates to drop from the painful 50–70% range down to normal business rates (roughly 25–30%) for most operators.

Important clarification:

• This does NOT change anything for 2025.
• 2025 returns will still be filed under 280E rules. If, and that’s a big if, the final rule ends up being retroactive to January 1, 2025, amended returns can be filed. Don’t count on that yet.

What you should (and shouldn’t) do now:

• File 2025 taxes normally
• Don’t get “creative” or file amended returns for prior years, the IRS has already said those claims aren’t valid
• Address any outstanding tax liabilities
• Don’t make financial decisions assuming relief will arrive on a specific date

What this change does not do:

• This is not legalization
• Banking does not automatically improve (we still need Congress to pass the SAFER Act)
• State taxes are not affected, Mississippi already decoupled from 280E, and the DOR does its own thing

What S E Fleming CPA and High Life Accounting are working on next:

Over the next few weeks, we will be building custom 2026 forecasts for our clients; real numbers, not guesses, to show exactly how this change impacts your operation. More updates to come as the final rule develops.