Can You Invest in Cannabis With an IRA?

In the U.S., experts expect the economic impact of regulated cannabis sales to exceed $123.6 billion in 2025, a 9% increase from the previous year. The cannabis market is booming, so why not jump in and invest?

Cannabis is in a legal gray area, rendering it susceptible to certain risks, but the rapidly growing market also offers great rewards. Accuplan can help you diversify your retirement portfolio and invest in alternative assets like cannabis companies with professional expertise.

Learn more about cannabis IRA investments, the legislation surrounding them and ways to profit from this thriving industry.

Why Investing in Cannabis Businesses Is a Gray Area

With 40 states allowing the medical use of cannabis products in 2025 and a multibillion-dollar industry, this market has great potential. Still, many investors are wary because of the legal gray area. In a sense, a cannabis IRA is legal and illegal. Since the early 1970s, the federal government hasn’t changed its stance on marijuana and marijuana products, which are still illegal federally and are subject to criminal law enforcement. However, some states have legalized the use of cannabis products, with successful businesses creating potentially lucrative investment options.

With cannabis being illegal on a federal level, many banks are reluctant to partner with cannabis companies, creating potential problems with handling cash flow, among other issues. The main downside of cannabis investments is that it’s still illegal on a federal level, so investments may come with legal difficulties.

How Do You Invest in Cannabis if It’s Federally Illegal?

If you want to invest in the cannabis industry, the good news is that you can legally invest even though it is illegal on a federal level. First, you can invest in legal cannabis companies registered in other countries. Alternatively, you can invest in companies within the cannabis industry that don’t directly deal with the plants, such as companies that sell cannabis paraphernalia, like smoking accessories.

The cannabis industry may be taking a step in a better direction for investors, but this has yet to be confirmed. In 2024, there was a proposal to change marijuana from a Schedule I to Schedule III drug under the Controlled Substances Act in the U.S., which could completely reshape investment capabilities. The cannabis industry is still awaiting the potential of this proposal being passed because if it is, it will change the industry’s financial climate and open up more investment opportunities.

Understanding the Legal Landscape of Cannabis and IRAs

Cannabis is still a Schedule I controlled substance on a federal level, but cannabis laws vary by state. Many states have legalized it for medical use only or medical and recreational use. Twenty-four states have legalized recreational marijuana use, including Maine, California and New York.

While the legal landscape is still murky, things appear to be moving in the right direction. You still have options if you want to invest in cannabis now.

What Is Section 280E?

Section 280E doesn’t directly impact investors, but it does affect the capabilities of your investments. According to this legislation, even if a cannabis company is state-compliant, it’s still viewed as federally illegal and falls under Section 280E, which changes how it’s taxed. That means it can’t benefit from the same tax deductions other businesses can and is taxed on gross profit rather than net income.

The challenge here is that it requires substantially high profits to afford federal taxes and turn a comfortable profit. Investors should be very meticulous about the companies they choose to invest in and can seek guidance from qualified experts at Accuplan. Section 280E is also one of the reasons why many choose to invest in cannabis businesses outside of America.

IRS Regulations and What’s Allowed in Your IRA

Investing in cannabis businesses with your IRA is a bit more complicated because IRA funds typically can’t be invested in certain things. Here are some of the restrictions of IRA investments:

Collectibles: You can’t invest IRA funds in collectibles such as artwork, alcohol, stamps, rugs or automobiles.
Personal use assets: You can’t use your IRA to fund your personal or business entities, or own property in your IRA that you use for personal purposes.
Loan to disqualified individuals or yourself: You cannot loan money to yourself, your business, family members or any other disqualified persons.
Property that you or any other disqualified individual owns: You can’t use your IRA funds to buy or invest in property owned by you, your business, your family or any other disqualified person.
Personal guarantee loan: You can’t sign a personal guarantee on a loan that your IRA takes on.

Cannabis is not typically a suitable IRA investment because it’s federally illegal, but if you’re set on it, then you do have other options. The typical option for alternative investments would be to roll over your IRA into a self-directed account. However, this option doesn’t clear the murky waters of the current legalities surrounding cannabis.

Accuplan offers a more controlled option through our IRA LLC solution, which can help invest in cannabis with a retirement account and under less murky conditions.

Advantages of a Self-Directed IRA

Self-directed IRAs offer various benefits that a typical IRA doesn’t, mainly the ability to invest in assets outside of traditional stocks, funds and bonds. Part of these advantages for cannabis investments is getting checkbook control, which allows you more freedom over how you invest the money in your IRA.

Here’s a breakdown of self-directed IRA benefits and why it’s best for cannabis investments:

Potential for greater returns: Investors with expertise in the cannabis industry could take better advantage of a retirement account’s potential returns using a self-directed IRA.
Diversification: Self-directed IRAs allow investors to craft a more diverse and customized portfolio because they offer less conventional investments, like cannabis.
Tax breaks: Investors can build a customized portfolio that still offers the tax advantages of traditional and Roth IRAs.

While self-directed IRAs offer more freedom to investors, they aren’t perfect. You’ll need to do your due diligence and be wary of the lack of liquidity, which may make it more difficult to find a buyer for your assets if you need cash.

How to Invest in Cannabis With an IRA

If cannabis and your retirement plan go hand in hand, a self-directed IRA can help you make it happen. It allows you to invest beyond the typical stocks, bonds and mutual funds offered by conventional IRAs, while still benefiting from the tax breaks they offer.

However, using a self-directed IRA means you, as the account holder, assume all the risk. To improve your chances of finding a reliable self-directed IRA and a reputable custodian, follow these steps:

Choose the right partner: Streamline the process of setting up a self-directed IRA by finding a custodian or brokerage firm that accommodates self-directed retirement accounts, like Accuplan — we help you diversify your portfolio with non-traditional investments.
Open a self-directed IRA: You can apply for the account with your personal details, fund the account with direct contributions from qualified accounts and provide a direction of investment (DOI) form instructing your custodian to invest in cannabis assets.
Set up an LLC for your self-directed IRA: An LLC helps you gain tax advantages and access its profits after you retire. Your custodian and an LLC facilitator can help you establish it effectively. Once it’s in effect and your custodian invests your retirement money, you can open a checking account under it, allowing your IRA to invest without involving your custodian.

Invest Wisely With Accuplan

Investors looking to invest in the cannabis market should always be mindful of state law variations, ongoing legal changes and the potential for murky waters. If you’re serious about diversifying your portfolio with a cannabis investment, speak to the professionals at Accuplan. Most of our employees have over 15 years of experience and know the ins and outs of self-directed account investing, even in tricky industries like cannabis.

At Accuplan, we have the answers to all your questions about self-directed IRAs and can help you set up a diverse and fruitful investment portfolio. With over $2 billion in assets under our management, we are a well-trusted source for IRA investments. We offer administrative support for many types of self-directed IRA investments in booming fields like real estate, cryptocurrency and cannabis.

Our information shouldn’t be relied upon for investment advice, but simply for information and educational purposes only. It is not intended to provide, nor should it be relied upon for accounting, legal, tax or investment advice.