Welcome to my weekly feature where I talk about tax issues relating to gay marriage. If you have a topic that you would like to see covered, please e-mail me at dinesentax@gmail.com.

Gender Reassignment Surgery is Tax Deductible

This is not exactly a gay marriage story but it is an LGBT tax story. The IRS last week agreed with the U.S. Tax Court that sex change surgery can be tax deductible.

The case involved a person named Rhiannon O’Donnabhain who had been a man but underwent surgery in 2001 to become a woman. She deducted the surgery expenses on her 2001 tax return. The IRS denied the deduction and the case eventually made its way to the U.S. Tax Court, where the Court sided with O’Donnabhain in early 2010. Last week, the IRS “acquiesced” (meaning, they agree with) the Court’s decision.

One key point: sex-change surgery is NOT automatically deductible. The taxpayer has to prove that they have an underlying disorder that necessitates the surgery. In O’Donnabhain’s case, she was diagnosed with “gender identity disorder.” The sex-change surgery was done to treat the disorder and therefore the cost was deductible as a medical expense.

This is the same logic that is used when determining if plastic surgery is tax deductible. When someone gets a nose job just because they want their nose to look better, it’s not deductible. But if there’s a legitimate medical need for the plastic surgery, then it is deductible.

Further Reading:

  • Professor Pat Cain at Santa Clara Law School has more coverage here.
  • You can find the Tax Court ruling here (warning – it’s a 139-page ruling!).

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