One of the things intended parents often wonder about is surrogacy tax—specifically, the cost of surrogacy and whether any of those costs are tax-deductible. Surrogacy is a very expensive endeavor that can cost over tens of thousand of dollars and is surrounded by a lot of medical expenses. Unfortunately, a tax deductible claim for surrogacy and surrogacy expenses falls under the same category and does not qualify under current U.S. tax laws. Surrogacy costs are medical expenses but due to the stringent limits imposed by the IRS, they are not deductible.
What the IRS Allows as Deductible Medical Expenses
The IRS allows deductions on medical expenses if they are meant to diagnose, cure, alleviate, treat, or prevent a disease, or for any alteration of a bodily function or structure (IRC Section 213). For intended parents, medical expenses are only deductible for expenses directly pertaining to their own medical care or that of a dependent.
This suggests that while the intended parent can claim fertility treatments like in vitro fertilization (IVF), egg retrieval, or sperm bank storage as deductible expenses, costs associated with a surrogate mother, egg donor, or other related medical expenses likely do not qualify.
Why Surrogacy Costs Are Not Deductible
Surrogacy involves medical services provided to another person—the surrogate—not to the taxpayer claiming the deduction. The IRS does not view these payments as medical expenses incurred for the taxpayer’s own care. Therefore, expenses such as:
- Surrogate compensation
- Agency or legal fees
- Medical care for the surrogate
- Travel expenses related to surrogacy
are not deductible under federal tax law.
This interpretation has been supported by U.S. Tax Court rulings, including cases where taxpayers attempted to deduct surrogacy expenses as part of fertility treatments but were denied.
Possible Exceptions or Alternatives
If the intended parent is part of a same-sex couple or an individual using assisted reproduction, some states may have different interpretations or tax credits related to family building. However, at the federal level, there is no current deduction or credit for surrogacy costs.
Some employers now offer fertility or family planning benefits that cover parts of surrogacy expenses, which can help offset costs without relying on tax deductions.
Conclusion on Deduction of Surrogacy Tax
At this time, surrogacy expenses are not tax deductible under IRS guidelines, even though they involve medical procedures. Intended parents should consult a qualified tax advisor to explore other financial strategies or available benefits that may reduce the overall cost of surrogacy.
Confirm what’s deductible and explore employer benefits—book a surrogacy tax consult with Dimov Tax today.