Trans deductions

In the coming week, the U.S. Tax Court will review the case of Rhiannon O’Donnabhain, who is arguing that her sex-reassignment surgery should be tax deductible.

The Internal Revenue Service counters that O’Donnabhain’s surgery was cosmetic, not medically necessary and not a deductible medical expense.

For transgender advocates, this could be a precedent-setting case.

Previously, the IRS had ruled against allowing the deduction of medical costs associated with sex-reassignment surgery, although in 1983, it allowed a father to deduct his transportation costs when he accompanied his son to a clinic where he received a sex-change operation.

According to the IRS guidelines, deductions are allowed only for expenses paid for “the prevention or alleviation of a physical or mental defect or illness.”

Some of the specific expenses the IRS allow include costs associated with acupuncture, inpatient treatments at a center for alcohol or drug addiction, participating in smoking-cessation programs and drugs prescribed to alleviate nicotine withdrawal, and participating in a weight-loss program for a specific disease or diseases, including obesity, diagnosed by a physician.

Additionally, false teeth, prescription eyeglasses and contact lenses, laser eye surgery, hearing aids and crutches are deductible medical expenses.

As gender-identity disorder is recognized in the Diagnostic and Statistical Manual of Mental Disorders of the American Psychiatric Association, it would follow that surgery and hormones to correct the disorder would be allowable deductions.

But, as some transgender activists are advocating for the removal of gender-identity disorder from the DSM (as gays and lesbians successfully advocated for years ago), the issue is complex.

If gender-identity disorder is removed from the DSM and no longer classified a “disorder,” would sex-reassignment surgery be considered a medical necessity by the government for tax purposes?

Which begs the further question, why is gender identity an issue that the tax-collecting agency of the federal government can weigh in on?

As to impact on tax revenue, how many people have sex-reassignment surgery per year? (The APA estimates the prevalence of transsexualism at one in 10,000 biological males and one in 30,000 biological females.)

There are several possible resolutions. First, the IRS could (and should under its own standards and the healthcare system) allow the deduction of medical expenses for sex-reassignment surgery. It’s medically necessary, regardless if it is classified a disorder, a disassociative condition or an illness. Second, insurance companies could cover the expenses. Third, the country could institute a single-payer healthcare system, eliminating the need for either.