New tax law on the books.  Sent to me from my husband.  So if you want a sex change operation.  Now's the time to do so but that doesn't include breast augmentation.  So if you're going from male to female, you're on your own for costs incurred up there! 

Sex change costs except those for breast augmentation held deductible as
medical expenses O'Donnabhain (2010), 134 TC No. 4

The Tax Court has held that an individual could deduct as a medical
care expense under Code Sec. 213 amounts paid for hormone therapy and
sex reassignment surgery that were incurred in connection with a
condition known as gender identity disorder, which the Tax Court found
to be a disease. However, it found that breast augmentation surgery that
the individual also had in connection with the disorder was cosmetic
surgery and amounts paid for it were not deductible under Code Sec.
213(d)(9) .

Background. Code Sec. 213(a) permits a deduction for expenses paid
during the tax year for medical care of the taxpayer, spouse or
dependent; an expense is for medical care if it is paid for the
diagnosis, cure, mitigation, treatment or prevention of disease. Amounts
paid for "cosmetic surgery" or other similar procedures can't be
taken into account as a medical expense deduction, unless the surgery or
procedure is necessary to ameliorate a deformity arising from (or
directly related to) a (1) congenital abnormality, (2) personal injury
resulting from an accident or trauma, or (3) disfiguring disease. ( Code
Sec. 213(d)(9)(A) ) "Cosmetic surgery" is any procedure that is
directed at improving the patient's appearance and doesn't meaningfully
promote the proper function of the body or prevent or treat illness or
disease. ( Code Sec. 213(d)(9)( )

Facts. Rhiannon G. O'Donnabhain (the Tax Court petitioner) was born a
genetic male with unambiguous male genitalia. However, she was
uncomfortable in the male gender role from childhood and first wore
women's clothing secretly around age 10. (Reflecting O'Donnabhain's
preference, the Court used the feminine pronoun to refer to her
throughout the opinion). Her discomfort regarding her gender intensified
in adolescence, and she continued to dress in women's clothing secretly.


As an adult, O'Donnabhain earned a degree in civil engineering, served
on active duty with the U.S. Coast Guard, found employment at an
engineering firm, married, and fathered three children. However, her
discomfort with her gender persisted. She felt that she was a female
trapped in a male body, and she continued to secretly wear women's
clothing.

O'Donnabhain's marriage ended after more than 20 years. After
separating from her spouse in '92, her feelings that she wanted to be
female intensified and grew more persistent. Eventually, she contacted
Diane Ellaborn (Ms. Ellaborn), a licensed independent clinical social
worker (LICSW) and psychotherapist, and commenced psychotherapy sessions
in August '96. In early '97, after approximately 20 weekly individual
therapy sessions, Ms. Ellaborn's diagnosis was that O'Donnabhain was a
transsexual suffering from severe gender identity disorder (GID), a
condition listed in the Diagnostic and Statistical Manual of Mental
Disorders (4th ed. 2000 text revision) (DSM-IVTR), published by the
American Psychiatric Association.

Medical professionals who treat gender identity disorder prescribe for
its treatment in genetic males, depending on the severity of the
condition, (i) administration of feminizing hormones; (ii) living as a
female in public; and (iii) after at least a year of living as a female,
surgical modification of the genitals and, in some circumstances,
breasts to resemble those of a female (sex reassignment surgery).

Pursuant to this treatment regimen, O'Donnabhain was prescribed
feminizing hormones in '97 and continued to take them through 2001. In
2000, after plastic surgery to feminize facial features, she began
presenting full time in public as a female. In 2001 she underwent sex
reassignment surgery, including breast augmentation surgery.

O'Donnabhain claimed a medical expense deduction for the cost of the
surgeries, transportation and other related expenses, and feminizing
hormones, for tax year 2001. IRS disallowed the deduction.

Court's holdings. The Tax Court held that O'Donnabhain's gender
identity disorder is a "disease" within the meaning of Code Sec.
213(d)(1)(A) and Code Sec. 213(d)(9)( . It further held that her
hormone therapy and sex reassignment surgery were "for
the...treatment...of" and "[treated]" disease within the meaning
of Code Sec. 213(d)(1)(A) and Code Sec. 213(d)(9)( , respectively, and
consequently the procedures were not "cosmetic surgery" excluded
from the definition of "medical care" by Code Sec. 213(d)(9)( .
Rather, the amounts paid for the procedures were expenses for "medical
care" that were deductible under Code Sec. 213(a) .

However, the Tax Court held that O'Donnabhain's breast augmentation
surgery was directed at improving her appearance and that she had not
shown that the surgery either meaningfully promoted the proper function
of the body or treated a disease within the meaning of Code Sec.
213(d)(9)( . Accordingly, the breast augmentation surgery was
"cosmetic surgery" within the meaning of Code Sec. 213(d)(9)(
that was excluded from the definition of deductible "medical care"
by Code Sec. 213(d)(9)(A) .