Diane Kemker (Southern, DePaul), When Gender-Affirming Healthcare Becomes Illegal, Will It (Still) Be Tax-Deductible?:

In the absence of universal health care, which itself exacts a deadly toll on Americans, all too many people face unmanageable medical costs. Even those with insurance may find themselves with large, uninsured expenses. The Internal Revenue Code acknowledges these realities by permitting taxpayers to take a deduction for unusually large medical expenses incurred in a taxable year, whether for the taxpayer or their dependents. Although the statutory provision that creates this deduction does not condition deductibility on the legality of the medical treatment, the Regulations do.

Since the Tax Court decided O’Donnabhain v. Commissioner over a decade ago, the tax-deductibility of at least some gender-affirming healthcare has seemed secure. This is fortunate, because the expenses can easily run to six figures. But what if this care becomes illegal at the state level? Will it still be deductible for federal income tax purposes? Neither the Internal Revenue Code nor the Regulations contains a clear answer. Current federal tax law does not contemplate that medical care might be lawful in one state, while being banned (or even criminalized) in another. But right now, at least eighteen states have banned gender-affirming care for minors; another twelve are considering similar laws; Missouri’s governor sought to restrict care for all ages; and three other states have considered extending the ban to transgender people up to 26 years old. Nationwide, more than one hundred bills are pending that would restrict or eliminate access to gender-affirming care.

The cruel and discriminatory impact of such laws will be measured in suicides, hate crimes, and immense human suffering. The Internal Revenue Code should not make this increasingly desperate situation even worse. The tax code should not be used to further penalize those who obtain this necessary, life-saving care, for themselves or their family members, often at great hardship and expense. The IRS should amend the Regulations to make clear 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.