top of page

Is Surrogacy Tax Deductible?

Marketing Team


Starting or expanding a family is a costly venture no matter the route you take. If you are considering surrogacy for your family-growing journey, costs and expenses are probably at the top of your list of considerations. We make sure to break down all your surrogacy costs so you don't have any surprises along the way. During your financial planning, you might wonder about surrogacy tax deductions. 

 

Is surrogacy a tax deductible expense? The short answer is no, not all of it, but there are things you can do to get some financial reprieve. Let’s dive into it!

 

What Is Tax Deductible?

 

The easiest way to figure out which of your surrogacy expenses are tax deductible is if they are directly attributable to you, the intended parents. In other words, any medical processes that are performed on you and/or your spouse will be deductible on your tax returns. 

 

According to Section 213(a) of the Internal Revenue Code (IRC), taxpayers can deduct “expenses paid for medical care,” including expenses for pregnancy and birth, “to the extent the expenses exceed 7.5 percent of the taxpayer’s adjusted gross income.” Further down in the IRC, it explains that medical care costs of the taxpayer include “amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease or for the purpose of affecting any structure or function of the body.”

 

Because only medical treatments applicable to you, the intended parents, are deductible, here’s what can be deducted:

  • Any medical expenses directly attributed to you and your spouse

  • Egg retrieval

  • Sperm donation

  • Sperm freezing

  • IVF costs

 

These are the medical expenses that you can deduct from your taxable income during the surrogacy process. 

 

Issues for Same-Sex Couples

The language in IRC, while helpful to some, has presented issues for same-sex couples looking to have a baby via surrogacy. Same-sex couples might hit an obstacle when trying to deduct surrogacy expenses because of the IRS definition of medical care. Quite often, same-sex couples seek a surrogate’s help to have a child not because of infertility or some other medical condition but because of the nature of their relationship and what may or may not be possible from a reproductive perspective. Therefore, medical care deductions for the surrogacy are rejected. 


Surrogacy Expenses That Cannot Be Deducted

 While the expenses for the intended parents’ medical care can be deducted, the money spent on the surrogate cannot. Here is everything that cannot be deducted:

  • Surrogate compensation

  • Surrogate medical bills

  • Surrogate medical insurance

  • Anything not directly related to your family

 

Our financing partner, Sunfish, offers additional information about what surrogacy costs are tax deductible.


Can I Do Anything for the Other Expenses?

 

Even though the IRS lays out what surrogacy tax deductions can be claimed, there are still some options for seeking more help and alleviating part of the cost. 

 

Consider Seeking a Private Letter Ruling From the IRS

 One option is obtaining a Private Letter Ruling (PLR) from the IRS, which grants special permission to deduct specific expenses that are not made clear by law.

 

The best way to acquire a PLR would be through the help of a certified public accountant (CPA). You would hire them to write a letter to the IRS requesting permission to deduct all the expenses you plan to incur. You would then wait to hear back from the IRS indicating their decision. If permission was granted, you would attach the letter to your tax return. 

While this is not a surefire way to guarantee more expenses get written off on your tax return, it is certainly worth a try!


Explore Other Options

Many intended parents use financing to make the financial responsibility of surrogacy more budget-friendly. While it won't reduce your overall costs, it can break them down into more manageable chunks. In our related blog post, we also offer other ideas for reducing your surrogacy costs, such as using your own health insurance plan's third-party reproduction coverage (if available) to pay for some of your expenses.


Where Can I Learn More?

 

When you put your trust in us here at Circle, we guarantee to advocate for you and work with you at every turn of the surrogacy journey. Growing your family is a major milestone, and we want you to have the smoothest, most positive experience, which is why you will have a team of legal advisors to help you along the way. Working with our legal and financial teams, you can trust that you are getting the best care and getting the most out of your tax return! 

 

Ready to explore growing your family through surrogacy? Fill out our intended parent form to get started.

 

bottom of page