Diane Kemker (Southern; Google Scholar), When Gender-Affirming Healthcare Becomes Illegal, Will It (Still) Be Tax-Deductible?, ABA Tax Times, Vol. 42, No. 4, Sept. 2023, p. 13:
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 deductible.”
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.
