Trans Woman Wins IRS Suit To Deduct Surgery Costs

A 57 year old trans woman battling the IRS over a tax deduction for the costs of her sex realignment surgery says she feels like she won a victory for all transgender people.

Rhiannon O'Donnabhain (oh-DON'-oh-vin) with the help of GLAD (Gay & Lesbian Advocates & Defenders) sued the Internal Revenue Service in 2007 after the agency rejected a $5,000 deduction for about $25,000 in medical expenses associated with her surgery, asserting it was a cosmetic procedure and not medically necessary.

On Tuesday, the U.S. Tax Court ruled that O'Donnabhain should be allowed to deduct the costs of her treatment for gender-identity disorder, including sex-reassignment surgery and hormone replacement therapy on an 11-5 vote.

"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 said in an interview Wednesday.

In a dissenting opinion, Judge David Gustafson said he believes sex reassignment surgery falls within the "cosmetic surgery" category of the tax code and the expense is therefore not deductible.

Even if such surgery "is medically indicated ... it is an otherwise cosmetic procedure that does not 'treat' the mental disease," Gustafson wrote.

GLAD said the decision could potentially affect thousands of people a year in the United States who undergo similar operations.

"It was a proper medical deduction, and it certainly is not cosmetic surgery as the IRS contended," she said.

IRS spokeswoman Michelle Eldridge declined to comment on the ruling.

Lambda Legal called the ruling "a case of the federal government catching up with medical standards."

"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, this type of surgery is frequently a medical necessity for their lives and for their health and for their well-being," said Hayley Gorenberg, deputy legal director at Lambda Legal.