IRS Okays Tax Deduction for Sex-Reassignment Surgery

WASHINGTON, D.C.—Although citizens are allowed to deduct unreimbursed medical expenses from their federal tax returns, a new ruling by the U.S. Tax Court allows transgendered persons to deduct the costs of treating their "gender identity disorder" (GID), including hormones, sex-reassignment surgery, therapy and other expenses related to the treatment of GID that satisfy the requirements of Section 213 of the Internal Revenue Code.

The case involves Rhiannon O'Donnabhain, who paid for the hormone therapy and surgery to change from male to female, but when she tried to deduct those expenses from her 2010 tax return, the IRS disallowed the deductions because they "did not treat a medically recognized disease or promote the proper function of the body," according to the Tax Court ruling in her case.

"The Tax Court agreed with Ms. O’Donnabhain that her gender identity disorder is a disease within the meaning of §§ 213(d)(1)(A) and (9)(B)," the court ruled (.pdf). "The court cited four bases for its conclusion: 1) the disorder is widely recognized in diagnostic and psychiatric reference texts; 2) the texts and all three experts testifying in the case consider the disorder a serious medical condition; 3) the mental health professionals who examined Ms. O’Donnabhain found that her disorder was a severe impairment; and, 4) the Courts of Appeal generally consider gender identity disorder a serious medical condition. The court held that because hormone therapy and sex reassignment surgery treat the taxpayer’s disease they are medical care, and the expenses for that medical care are deductible under § 213."

Although the Tax Court ruling is careful to note that, "THIS DOCUMENT IS NOT TO BE RELIED UPON OR OTHERWISE CITED AS PRECEDENT BY TAXPAYERS," IRS Branch Chief Thomas D. Moffit nonetheless wrote, "The Service will follow the O’Donnabhain decision. The Service will no longer take the position reflected in [IRS claim rejection] CCA 200603025."

Still, as the website noted, O’Donnabhain was not able to deduct her breast enhancement surgery.

"The Court felt that she had obtained 'normal' breasts through hormone treatment and concluded that there was insufficient documentation by the doctors that this procedure was needed for the treatment of Rhiannon’s GID. However, this does not preclude you from claiming breast surgery as a medical deduction for the treatment of your GID. The bottom line is to make sure that you have the strongest medical documentation possible for each part of the treatment for which you are claiming a medical deduction."

Nonetheless, they still hailed the Tax Court win as a major victory for transgenders.

"This is a very strong decision, recognizing the legitimacy of GID as a medical condition and, therefore, that expenses related to the treatment of GID may be deductible," the GLAD site notes. "If you have had treatment for GID and are trying to decide whether you should claim related expenses as a medical deduction on your federal income tax, here is some information that may help you to decide. We are, however, not able to provide specific legal advice, so we strongly recommend that you take this information to a tax expert—a CPA or tax attorney—who can assist you in making your decision."