Keri Renault

U.S. Tax Court Rules in Favor of Transsexual Woman

Filed By Keri Renault | February 03, 2010 4:00 PM | comments

Filed in: Politics, Transgender & Intersex
Tags: DSM IV, IRS, medical expenses, Rhiannon O'Donnabhain, SRS, Standards of Care, tax deduction, transgender, transsexual, U.S. Tax Court

Rhiannon O'Donnabhain finally got the tax break she deserved from the IRS in 2001.

Tuesday, Federal Tax Court ruled in favor of the petitioner, a transsexual woman in the landmark case of O'Donnabhain v. Commissioner of Internal Revenue. The favorable ruling opens the doors wide to tax equality for transgender Americans.

Citing protocol from Harry Benjamin/WPATH Standards of Care and DSM-IV, the court ruled that medical treatment for gender identity disorder (GID) qualifies as tax deductible medical care under the Internal Revenue Code.

In 2001, O'Donnabhain underwent sex reassignment surgery (SRS). She claimed the cost of surgeries, transportation and related expenses in the same tax year as a medical expense deduction under section 214, I.R.C.

The medical deduction was rejected by the IRS.

In the landmark victory won by Gay & Lesbian Advocates & Defenders (GLAD) the court rejected an argument by the IRS that transgender medical treatment is different than medically necessary treatment recommended by recognized medical and psychological organizations.

The U.S. Tax Court decision has huge financial ramifications for transgender Americans, opening the door to potential deductions in other related areas of transition as defined under the Standards of Care.

The Harry Benjamin Standards of Care for GID prescribe a "triadic" treatment sequence including 1) cross-gender hormone therapy to effect changes in physical appearance toward the opposite sex; 2) "real-life" experience described as a trial period of living full time in society as a member of the opposite sex and 3) sex reassignment surgery including non-genital surgical sex reassignment.

Non-genital surgical sex reassignment refers to any and all other surgical procedures of non-genital, or non-breast, sites (ie: nose, throat, chin, cheeks, hips, etc.) conducted for the purpose of effecting a more masculine appearance in a genetic female or for the purpose of effecting a more feminine appearance in a genetic male in the absence of identifiable pathology which would warrant such surgery regardless of the patient's genetic sex.

More than 80% of all transgender individuals never transition in large part due to discriminatory health care insurance practices which typically exclude treatment for gender identity disorder (GID).

The full scope of transition---gender counseling, hormone therapy, medical supervision, hair removal, genital, facial and body surgeries--can easily exceed $50,000, in some cases over $100,000.

Since "non-genital sex reassignment procedures" often are performed together as facial feminization surgery (FFS) for trans-women it's logical to extrapolate that these procedures could be in line to qualify as medically necessary tax deductions.

The court case and it's ramifications on the transgender community will be the topic of a conference call tonight at 6pm Eastern hosted by GLAD.


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Thanks for this Keri--
This ruling, as you pointed out, is potentially very important to opening up insurance coverage for transition related expenses. While both the AMA and APA have called for equal and fair access to healthcare for transgender people, we are still a long way off from anything remotely resembling equity.

My personal situation has been fortunate. My spouses' insurance has covered all of my transition expenses including hormones, breast augmentation, therapy, as well as my primary srs.
I have had major complications from my srs which has involved several subsequent surgeries. What about the typical person who does not have insurance coverage and has had to scrimp and save every penny--sometimes for years to have srs? My spouse and I can't help but wonder what would befall someone who didn't have health coverage and then had complications like me.

Excellent points, Amy. Complications and critical after-care are important, but seldom considered issues within the context of SRS, FFS & BA. As you said, there's absolutely no safety net for those who have saved a lifetime, cashed in their retirement funds, drained their home equity to live the dream of gender congruency. Thanks for sharing.

I'm really thrilled about this victory. It's a much needed piece of good news among a pile of bad. Now all I need is to find a job good enough so I can save the required fee for SRS before I die while still being able to pay my bills.

I hope this court decision will echo in the halls of Congress as we lobby (or have the big GLB(t) orgs given up?) for ENDA. We still need all the protection we can get.

My belief is that this landmark verdict will add both legitimacy and urgency to the mandate for Federal Protections such as ENDA. There's a momentum building that is slowly approaching critical mass. The O'Donnabhain victory should also open a few deaf ears in the health insurance industry. Hopefully, it won't be too long before the AMA, APA and verdicts like this create enough force to cause big insurance to drop their unjust transgender/transsexual/GID exclusions across the board.

It's my hope this victory will spur more trans people to try and get their rights through the courts, which was the main strategy back in the 60s- early 90s... and it WORKED. Ms. O'Donnabhain and GLAD have done a wonderful service to all people who need SRS and, hopefully, it can be a first step to, one day, having it be available as part of a single payer system like any other life-saving medical procedure. As it was, virtually all my transition expenses, including SRS and other surgeries, all came out of pocket. And we wonder why so many trans people are in dire financial straits.

Right on. This victory has generated a wave of positive "buzz" within the LGBT community. That will ampflify as others take advantage of the ruling. It's equality served that hopefully will empower transgender Americans to take action. Or as they said in the movie "Network": "I'm sick and tired of it and I'm not going to take it anymore."

I agree w/ gina - this is great for the day that we'll get a single-payer system in America (I'm hopeful!).

I just spoke with an agent at the IRS at 800-829-1040 (2/5/10), and at this point the IRS does not know how this ruling will affect the tax code. She said it is too soon to know. She did say to check back.

As it stands now, in the tax code, SRS is NOT deductible.