TAX RESEARCH

(Note – provided as an example only – enumerated conclusions may or may not be an accurate interpretation of the relevant law and authorities).

You were recently hired by a new client, Tanya, to advise her on certain tax issues. Tanya, an insurance agent, was born with an unusually large nose and ears. In addition, Tanya’s facial skin is unusually mottled and marred with large pores. The total effect is considered by most to be very unattractive (a former blind date referred to Tanya as a “side-show attraction”). Accordingly, Tanya has been under treatment for severe psychological problems that her doctor has associated with her unusual appearance. Recently, a plastic surgeon advised Tanya that new surgical techniques offer an opportunity to correct all three of these conditions. These procedures have a very high probability of success but will cost approximately $25,000. Tanya’s AGI is expected to be $80,000 and unfortunately, her health insurance plan at work will only cover the cost of hospitalization ($5,000) associated with such procedures.

Issues

Can Tanya claim, as a medical expense deduction, all or a portion of the cost of the procedures intended to correct her appearance issues? Are her psychological problems enough to be considered an illness or disease? Are there any other options to help her solve her problems that are deductible?

Conclusion

Tanya would be able to deduct the costs associated to the time would be of hospitalized, but she cannot deduct the medical expenses for her actual cosmetic surgery. Since the procedure does not appear to fix defects caused from a traumatic accident or disease, correcting her appearance issues may not be subject to a tax deduction. Further exploration of the issue of congenital defect issue may be appropriate. However, Tanya can elect to take part in psychological sessions if she would like her medical expenses to be deductible.

Arguments and Authorities

In this case, deductions are allowed for expenses that are considered medical care. According to IRC Sec 213(d)(2), costs associated with lodging while away from home primarily for medical care can be treated as amounts paid for medical care. However, Tanya’s desire to correct her appearance will not be able to be deducted. Under IRC Sec 213(d)(9), cosmetic surgery is a procedure that improves a patient’s appearance, but does not promote the proper function of the body or treat illnesses or diseases. Cosmetic surgery does not fall in the scope of medical aid if it is not necessary to ameliorate a deformity caused by congenital abnormality, injury from an accident or trauma, or disfiguring disease. The psychological problems that Tanya is dealing with due to the fact that she is perceived as unattractive may not fall under the allowable categories.

Another option for Tanya, in order to help her with her psychological problems with her appearance, is for her to attend psychiatric therapy. IRS Pub. 502 states that medical expense amounts for a psychologist, psychoanalysis and psychiatric care are all considered medical care and can be deducted.

IRC Sec 213(d)(2)