We are living in a time of unprecedented legal attacks on the health, safety, and existence of transgender people. These attacks include laws restricting or even prohibiting access to gender-affirming health care, including prescription drugs and surgical treatments. Currently, at least eighteen states have banned gender-affirming care for minors; another twelve are considering similar laws; Missouri’s governor sought to ban gender-affirming care for all ages; and three states (Oklahoma, Texas, and South Carolina) have considered extending the ban to transgender people up to 26 years old. On May 17, 2023, a law took effect in Florida that makes refilling hormone prescriptions nearly impossible for approximately 80% of transgender adults, many of whom have been on such treatments for years. On September 1, 2023, Texas became the most populous state to ban gender-affirming care for minors, including those already undergoing treatment who must be taken off of it.
With or without health insurance, gender-affirming care is expensive. Since 2011, when the IRS acquiesced in O’Donnabhain v. Commissioner, the tax-deductibility of at least some gender-affirming healthcare has, however, seemed secure. A new question arises when this care is illegal at the state level: is it still deductible for federal income tax purposes? Neither the Internal Revenue Code provisions nor the regulations contain a clear answer. Current federal tax law does not contemplate that appropriate medical care might be lawful in one state while being banned (or even criminalized) in another. Although Section 213 does not condition medical expense deductibility on the legality of the treatment, the regulations (and Publication 502) expressly state that “[a]mounts expended for illegal operations or treatments are not
As more forms of gender-affirming care are restricted or outlawed at the state level, taxpayers will have to determine whether they may still take a deduction for them. The impact will be felt as soon as the 2023 tax year. In the current environment of anti-trans legal panic, the tax laws must not make an increasingly desperate situation even worse. This essay suggests that the regulations under section 213 should immediately be amended to clarify that so long as gender-affirming care is lawful where provided, the associated expenses are tax deductible, regardless of their status under the state law of the taxpayer’s residence.
I. Current Law: Medical Expenses, Section 213, and O’Donnabhain
Uninsured medical expenses incurred for oneself or one’s dependents are among the most significant expenses a taxpayer may incur. In fact, nearly two-thirds of all bankruptcies in the United States are the result of medical debt. In recognition of the impact of large medical expenses on taxpayers’ ability to pay (and real income for the year), section 213(a) permits “as a deduction the expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, [their] spouse, or a dependent…to the extent such expenses exceed 7.5 percent of gross income.” The section also permits the deduction of associated expenses for transportation and lodging, so long as the travel is “primarily for and essential to receiving medical The current medical expense deduction is subject to a 7.5% adjusted gross income (AGI) floor, reflecting a compromise with the rule of section 262(a) that “no deduction shall be allowed for personal, living, or family expenses.” Transition-related expenses today can run from $125,000 to $140,000, including both ongoing and one-time expenses, some or all of which may not be covered by insurance—expensive enough to exceed the AGI floor for all but the most high-income taxpayers, especially if the patient must travel out of state to receive care (as many must, to find the experienced, specialized surgeons who know how to perform these procedures).
Section 213(d)(9) imposes a further limitation on deductibility. That part of the statute defines “medical care” to exclude “cosmetic surgery or other similar procedures, unless the surgery or procedure is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease.” Excluded cosmetic surgery is defined as “any procedure which is directed at improving the patient’s appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease.”
Feminizing surgery for transwomen/transfeminine patients may include orchiectomy (removal of testicles); penectomy (removal of the penis); vaginoplasty, clitoroplasty, and labioplasty; breast augmentation (with implants, tissue expanders, or fat transplants); abdominoplasty (tummy tuck); gluteal augmentation (buttock lift); voice feminizing therapy and surgery; as well as facial feminization surgeries, which may include forehead contouring; eye and eyelid modification; cheek augmentation (with implants, fat transplants, or cheekbone reshaping); nose reshaping (rhinoplasty); lip lift and augmentation (with implants, fillers, or fat transplants); jaw angle reduction; and chin width reduction. Transwomen may also obtain a tracheal shave (to minimize the thyroid cartilage known as the Adam’s apple); and changes to the hairline including hair transplantation.
For transmasculine individuals, the most frequent surgery is bilateral mastectomy, with chest reconstruction. Hysterectomy is also common and is usually required before vaginectomy, scrotoplasty and/or phalloplasty. Complete or partial oophorectomy (ovary removal may be used, depending in part on whether the person will be taking testosterone. Metoidioplasty (clitoral release of the testosterone-enlarged clitoris) is one approach to genital reconstruction, focusing on preserving erectile capacity and erotic sensation. An alternative is phalloplasty, using grafts to create a phallus that more closely resembles an erect male-assigned penis in appearance with erectile capacity created by a penile implant (a subsequent surgery). Phalloplasty has a high rate of complications, many of which require subsequent surgery. Either of these is typically performed together with scrotoplasty (using tissue of the labia majora and silicone implants). Urethroplasty permits urination through the clitoris, but it carries the risk of fistula requiring further surgery.
The specific medical details of these evolving procedures are less significant for tax purposes than the fact that many of them serve both functional and appearance-related ends. Deductible, or not? In O’Donnabhain, Tax Court Judge Halpern helpfully summarized the somewhat convoluted inner workings of Section 213.
The best way of framing the question of deductibility is to view the medical-expense provisions in the Code as creating a series of rules and exceptions. Section 262(a) creates a general rule that personal expenses are not deductible. Section 213(a) and (d)(1) then creates an exception to the general rule for the expenses of medical care if they exceed a particular percentage of adjusted gross income. Section 213(d)(9) then creates an exception to the exception for cosmetic surgery. And section 213(d)(9)(A) then creates a third-order exception restoring deductibility for certain types of cosmetic surgery.
The question of which expenses related to gender-affirming care are deductible, and which are not, as well as the general deductibility of gender-affirming care was addressed by the Tax Court in 2010. In O’Donnabhain v. Commissioner, the Service denied Rhiannon O’Donnabhain a deduction of nearly $22,000 in uninsured transition-related medical expenses incurred in 2001. (In that year, the standard deduction for a single filer was just $4550, so O’Donnabhain reasonably itemized her deductions to minimize her tax liability.) Her uninsured expenses were broken down as follows:
$19,195 to Dr. Meltzer for surgical procedures, including $14,495 for vaginoplasty and other procedures, $4,500 for breast augmentation, and $200 towards a portion of petitioner’s postsurgical stay at Dr. Meltzer’s facility; (2) $60 for medical equipment; (3) $1,544 in travel and lodging costs away from home for presurgical consultation and surgery; (4) $300 to Ms. Ellaborn for therapy; (5) $260 for the consultation for a second referral letter for surgery; and (6) $382 for hormone
In a lengthy decision including five concurrences and partial concurrences/partial dissents, an en banc panel of nine Tax Court judges held that the expenses associated with surgery and hormones were deductible, while the expenses of breast augmentation were not (treating them as cosmetic). The decision is controversial among scholars, as illustrated by a rewriting of the opinion from a feminist and LGBTQ point ofNonetheless, there is consensus on the deductibility of the most significant expense, genital reconstruction (which may actually involve multiple surgeries), as well as the ongoing (potentially lifelong) expense of hormone therapy.
Recent state legislation, however, calls this seriously into question.