IRS Recognizes Tax Deductions for Gender Transition-Related Medical Care

This past Wednesday, the IRS formally announced its intent to comply with an historic 2010 decision of the U.S. Tax Court in O’Donnabhain v. Commissioner. The Tax Court’s decision overturned IRS policy which prohibited tax deductions for medical care related to gender transition including, among other forms of treatment, sex reassignment surgery and hormone therapy.

The case had been filed on behalf of a transgender woman after she was denied the ability to claim as a tax deduction expenses related to medical care for her transition. In its denial, the IRS cited a 2005 guidance from the IRS’s Chief Counsel, which argued that care related to gender transition is not medically necessary. The Tax Court disagreed with the IRS, noting in the decision,

Hormone therapy, sex reassignment surgery and, under certain conditions, breast augmentation surgery are prescribed therapeutic interventions, or treatments, for GID [Gender Identity Disorder] outlined in the Benjamin standards of care. The Benjamin standards are widely accepted in the psychiatric profession, as evidenced by the recognition of the standards’ triadic therapy sequence as the appropriate treatment for GID and transsexualism in numerous psychiatric and medical reference texts. Indeed, every psychiatric reference text that has been established as authoritative in this case endorses sex reassignment surgery as a treatment for GID in appropriate circumstances.

The IRS’s announcement marks an historic development in transgender rights as they relate to tax law, allowing transgender taxpayers equal treatment with regard to medical care deductions. This is an important step in minimizing the financial barriers that transgender people face in accessing medically necessary care.

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