IRS Publishes Redacted Version of DNA Testing Private Letter Ruling

In a story posted on August 1, 2019 we noted that DNA testing firm 23andMe had reported receiving a private letter ruling from the IRS that allows for a portion of a DNA test kit fee paid for ancestry and health testing qualified as a deductible medical expense under IRC §213. The ruling (PLR 201933005) has been posted by IRS.

While most taxpayers do not itemize, and even those that do often have not incurred the necessary amount of medical expenses to begin to deduct them on Schedule A, the ruling clears the way to use HSA funds to reimburse the taxpayer for the medical portion of the fee. As well, flexible spending accounts also should be able to reimburse such amounts as well.

One key thing to note is that the ruling does not lay out any sort of detailed mechanism to calculate the deductible amount, which is not surprising since PLRs rule only on matters of law—the exact amount of the fee paid to the vendor that represents medical vs. non-medical costs is a factual matter. All the ruling tells us is that the taxpayers needs to reasonably allocate the cost between the two categories.

As well, the ruling notes that only a DNA testing service that includes health features is eligible for this treatment. The basic test sold by 23andMe does not offer such health testing. Only a portion of the fee for the more expensive service will qualify for a partial deduction.