For the first time in history, the federal Tax Court has approved a sex change operation as a medical expense deduction for a taxpayer.
The taxpayer was born male and diagnosed with a gender identity disorder. The male took a series of feminizing hormones from 1997 to 2001 and underwent gender reassignment surgery in 2001. For the 2001 tax year, the individual claimed a total of $21,741 in deductions for the cost of the hormones, surgeries, transportation and surgery-related expenses. When the individual first submitted his tax return, the IRS did not allow the deduction.
According IRC § 213, taxpayers are permitted to deduct the cost of medical care paid during a tax year as long as the total amount does not exceed 7.5% of the taxpayer’s adjusted gross income. In this case, the IRS argued that the taxpayer’s hormone therapy, sex reassignment surgery and breast augmentation surgery could not be considered a medical expense and qualified instead as cosmetic surgery. The IRS also argued that there was no evidence that the procedures were actually effective in treating the individual’s gender identity disorder because gender identity disorder is a mental disorder, not a physical one.
After reviewing the case, the Tax Court concluded that gender identify disorder is a disease for purposes of IRC § 213 and that since the taxpayer suffered significant impairment from the disease, the surgeries were performed to treat a medical condition. Experts in court testified that the sex reassignment surgery and breast implants were a part of the treatment plan for the individual and are effective for treating gender identity disorder.
The court allowed the taxpayer to take a deduction for the costs of hormone therapy and sex reassignment surgery, but did not permit the taxpayer to take a deduction on breast augmentation surgery because breast implants.