Use a ROTH IRA to beat Cannabis Stock Taxes

Legal cannabis is expected to be one of the fastest-growing industries in the world in the next five years. According to leading cannabis market-research firm Arcview, legal cannabis sales will more than double in the next five years.

Here are some details directly from the report.

According to the report, 2018 showed a growth rate of 20 percent in the global sales of cannabis in regulated markets, with sales on track to surge 36 percent to $14.9 billion in 2019 and break $40 billion by 2024.

NEW REPORT: Global Legal Cannabis Markets to Grow 36% in 2019 Despite 2018 Challenges; To Break $40 Billion by 2024

Growth potential like this is hard for any investor to pass up.

If cannabis stocks do produce a new class of millionaires, the big winners could be hit with an unexpected problem – a big tax bill.

The #1 Cannabis Stock for 2020

Today, I am going to reveal a popular retirement account that is a great fit for cannabis investors looking to avoid paying taxes on big gains.

The ROTH IRA is one of the most popular retirement accounts. The ROTH has gained its growing popularity because of one key feature.

Account-holders pay income taxes on ROTH IRA contributions – but they do not pay taxes on distributions.

This is the exact opposite tax treatment of another popular retirement account, the Traditional IRA. Traditional IRA account holders don’t pay income taxes on contributions – but they do pay income taxes on distributions.

This key difference in tax treatment between the traditional IRA and ROTH has important implications for cannabis investors expecting big capital gains in the next five, ten or even twenty years.

Let me show you what I mean.

Traditional IRA

  • Contributes 100K to traditional IRA
  • Tax Bill on Contributions: $0
  • 100K grows into $1 million.
  • Tax bill on $1 million distribution: 200K
  • Total Tax Bill: 200K


  • Contributes 100K to ROTH IRA
  • Tax Bill on contributions: $20K
  • 100K grows into $1 million.
  • Tax Bill on $1 million distribution: $0
  • Total Tax Bill: $20K

As you can see, in this situation where the value of the Traditional IRA and ROTH IRA both jumped sharply over many years, the ROTH IRA offers big tax savings. It’s not even close.

Those potential tax savings are awesome. But the benefits of the ROTH IRA don’t end there.

4 More Important Benefits of the ROTH IRA

#1 – ROTH IRA owners can make contributions to the account at any age as long as they have shown earned income. This is different than a traditional IRA with an age limit of 70.5 for contributions.

#2 – ROTH IRA does not carry required minimum distributions (RMD) like the traditional IRA, where account holders are required to take distributions once they reach the age of 70.5.

#3  – ROTH IRA account holders are allowed to take a one-time, penalty-free distribution of $10,000 for a first-time home purchase. ROTH IRA funds can be used penalty-free for other unexpected expenses such as medical insurance premiums if unemployed and back taxes.

#4 – ROTH IRA income limits are more flexible than the traditional IRA. For example, single tax filers begin losing tax breaks on a traditional IRA with income above $64,000. For a ROTH IRA, those income limits don’t start kicking in until $122,000 of income.

ROTH IRA and Cannabis Stocks

There is no age limit to open up a ROTH IRA as long as the account holder has more than $10,000 in earned income. These accounts offer potential tax benefits to cannabis investors looking to scoop up big gains in the next few years. But even if you’re not a cannabis investor, there are still plenty of great reasons to use the ROTH IRA to save for retirement.

Keep in mind that I am not a tax preparer.

This material has been prepared for informational purposes only and is not intended to be relied on for tax, legal, or accounting advice. You should always consult your own tax, legal, and financial advisor before making any decision or engaging in a transaction.

About the Author

Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.