On the other hand, cosmetic treatments are generally not deductible.
Strategy: Don’t dismiss or ignore an expense simply because it’s unusual. As long as it qualifies and isn’t cosmetic, add it to your total. It could push you over the 7.5%-of-AGI mark.
Depending on the amount at stake, you might even fight the IRS if challenged. In a new case, the Tax Court ruled in favor of a taxpayer who claimed approximately $5,000 in medical deductions for expenses relating to a sex-change operation.
Facts: The taxpayer, who was born male, was diagnosed in 1997 with “gender-identity disorder.” Her doctors recommended sex-change surgery, claiming it was a medical necessity. She underwent hormone therapy, sex-reassignment surgery and breast augmentation surgery in 2001. Then she claimed a medical expense deduction for the cost of the surgeries, transportation, feminizing hormones and other related expenses.
The taxpayer received a tax refund, but was audited six months later. The matter progressed to the Tax Court.
At trial, the Tax Court said the taxpayer’s hormone therapy and sex-reassignment surgery were incurred for the treatment of a disease. Therefore, these costs constituted tax-deductible medical expenses and were not cosmetic. (O’Donnabhain, 134 TC No. 4)
Tip: Obviously, this is an offbeat case, but you get the idea. If the cost qualifies, deduct it.