Update for 2019 Taxes: Click here to read our interview with CPA Sonia Stewart, an expert in third-party reproduction finances, and get the most up-to-date information. Or listen to what she has to say about tax deductions and surrogacy on Fertility Cafe podcast episode 6 Family Building Financials – Talking Escrow and Taxes with Sonia Stewart, CPA
Becoming a parent through the process of egg donation and surrogacy is quite the journey! The year that leads up to the birth, and then the first year of life, will fly by in a blur. Perhaps the first time that you’ll be reminded of just how much happened in such a (relatively) short amount of time is when you need to prepare your taxes for the first time since starting this journey.
This leads to a pretty important question.
Can I deduct medical expenses related to my surrogacy process?
For those lucky enough to create a family in the traditional way, the answer has long been, “yes.” Unfortunately, another cruel injustice to those needing a little help to create a family is that it is rare indeed for you to be able to deduct your family building medical expenses. Until very recently, tax breaks and laws for those using an egg donor or surrogate to create or grow their family have been murky to non-existent.
Things started to change in 2003 when the IRS ruled that couples using IVF could deduct fees associated with their treatment. This included costs associated with fertilization and embryo transfer. Additionally, agency fees, donor fees, and even medical and psychological testing fees are covered as medical expenses. Finally, insurance premiums connected with post-procedure care and even your legal fees (as related to contract preparation) can also qualify.
When it comes to your surrogate expenses, however, it’s a different conversation entirely. For the most part, most expenses will not qualify as a medical deduction. The exception would be surrogate expenses that can be tracked to an underlying medical condition that you have that makes it impossible for you to carry your own pregnancy.
You should consult with your tax professional and doctor to discuss your history of infertility to see what deductions may apply. A tax lawyer may be able to offer additional insight. It is wise to discuss your questions and concerns with a tax professional, tax attorney, or CPA to find the best solution for your individual situation.
While we agree that it’s not fair to those facing infertility to be excluded from tax deductions for medical expenses related to pregnancy and childbirth, the legal stance on this seems fairly concrete. This impacts members of the LGBTQ community particularly, as there is no underlying medical condition that prohibits them from conceiving children. There is hope that with dedicated advocacy, time, and educational awareness, these laws may change.
To learn more about what fees qualify (and which ones don’t) as it relates to your surrogacy medical expenses, check out this PDF.
Are you a surrogate who is wondering if your compensation will be taxed? Read more about surrogacy and taxes here: Do I Pay Taxes on My Surrogacy Compensation?
