Sex-Reassignment Surgery Deductible, Says Court

In a landmark case for transgender rights, the IRS must now allow transgender people to write off medical services related to gender-reassignment surgery. Find out more here.

In a landmark case for transgender rights, the U.S. Tax Court found that Rhiannon O’Donnabhain can deduct medical expenses associated with her gender-reassignment surgery. Born a man, O’Donnabhain filed a lawsuit in 2007 with the IRS after her $5,000 deduction in medical expenses associated with her transgender surgery was denied. The reason: The IRS considered it a cosmetic procedure, not a medical necessity.

But in O’Donnabhain v. Commissioner of Internal Revenue, the U.S. Tax Court found that sex-reassignment surgeries can qualify as deductible medical expenses under IRS code § 213 (d) (1) (A) & (9) (B). It medically defines gender identity disorder (GID) and holds that hormone therapy, gender-reassignment surgery, and breast augmentation in certain cases, are recognized treatments and not cosmetic procedures.

“The tax court has spoken for my community and has supported my community by saying that this is a proper medical deduction, much the same as an appendectomy or open heart surgery,” O’Donnabhain told The New York Times.

The New England LGBT advocacy group Gay & Lesbian Advocates & Defenders (GLAD), which co-represented O’Donnabhain, concurs. “This decision treats Rhiannon O’Donnabhain the way she deserves to be treated—like any hard-working American taxpayer with medical expenses,” stated GLAD Senior Staff Attorney Karen Loewy.

Rulings such as this increase the understanding of gender incongruity and the rights of transgender people, such as President Barack Obama’s recently appointed senior technical adviser for the Commerce Department’s Bureau of Industry and Security, Amanda Simpson. “I think it’s an important decision that could help educate and bring along transgender rights in other areas because it ratifies what the medical community has said clearly for years, which is for people with gender identity disorder (GID), this type of surgery is frequently a medical necessity for their lives and for their health and for their well-being,” Lambda Legal’s Deputy Legal Director Hayley Gorenberg told The New York Times.

There’s “lack of general understanding about the seriousness of GID,” writes Joanne Herman, who transitioned eight years ago to live as a woman. “Without this understanding, ‘the surgery’ can seem frivolous, just one step beyond a nose job. But the medical standards are based on results over time showing that people with GID are much happier after surgical treatment.”

Indeed, after O’Donnabhain underwent the surgeries recommended by her doctors, she reported that she felt comfortable with her body. But her out-of-pocket medical costs were $25,000.

“The main reason why the decision is so important is that most health plans exclude transgender health, so transgender people must pay the full cost out of pocket,” Herman tells DiversityInc. “The full bench of the U.S. Tax Court thoroughly examined the issues involved and confirmed the medical necessity, and therefore, deductibility, of the surgery. This decision makes it much harder for insurance companies to continue excluding coverage for these procedures.”

Human Rights Campaign Board of Director Meghan Stabler adds: “Transgender men and women alike primarily pay for treatment out of pocket due to discrimination in most health-insurance plans. Being able to deduct these expenses, just as with any other medical need, sends a clear message that all transgender people—as well as employers with inclusive health-insurance plans—can expect dignity, fairness and equal treatment from the IRS.”

According to the Gay & Lesbian Medical Association, as many as 2,000 people undergo sex-reassignment surgery each year.

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