Starting or expanding a family, as every parent knows, can be a costly venture with priceless dividends. Those costs are usually higher than average when the journey to parenthood includes surrogacy. Many intended parents who are working with a surrogate wonder if there is a tax deduction for surrogacy expenses, perhaps under the umbrella of deductions for medical expenses.
If you are considering surrogacy, this question may have crossed your mind as well. If so, you would not be the first person to ask “is surrogacy tax deductible?” Let’s take a look at what the government considers in deciding whether surrogacy expenses are tax deductible.
Most of us know that certain medical expenses are deductible on one’s income tax return. That includes expenses for pregnancy and birth. Section 213(a) of the Internal Revenue Code (IRC) states that a taxpayer may “deduct expenses paid for medical care of the taxpayer to the extent the expenses exceed 7.5 percent of the taxpayer's adjusted gross income.”
Section 213(d)(1)(A) helpfully explains that “medical care of the taxpayer” includes “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.”
While that definition might seem to make sense, it has caused problems for same-sex couples who want to create or grow a family through surrogacy. A number of same-sex couples have had their attempts to deduct surrogacy expenses rejected due to the IRS definition of medical care for two reasons. The first is that a gestational surrogate is a third party whose expenses for care would not be deductible on the intended parents’ income tax return. The second reason is that same-sex couples who seek a surrogate’s help to have a child do not typically do so because of infertility or some other medical condition. As a result, medical care deductions for the surrogacy are unavailable to them, where an opposite sex couple with infertility might be able to deduct some of their costs to have a child through assisted reproductive technology.
However, a new federal bill introduced by Rep. Adam Schiff and Rep. Judy Chu, both of California, could change the discriminatory effect of the statute’s current language.
The Equal Access to Reproductive Care Act, introduced by Reps. Schiff and Chu, contains some simple language that makes clear the intention for medical care to include surrogacy costs, regardless of the surrogate’s status as a third party or whether one of the intended parents is medically infertile. The Act reads, in part:
“COVERAGE OF SURROGACY, ETC.—
Assisted reproduction shall be treated as medical care of the taxpayer or the taxpayer’s spouse or dependent to the extent that the taxpayer or the taxpayer’s spouse or dependent, respectively, intends to take legal custody or responsibility for any children born as a result of such assisted reproduction.”
Critics of the bill argue that the bill, should it pass, would “redefine infertility through tax law”and “commodifies women.” However, the bill is endorsed by a wide range of respected organizations, including RESOLVE: The National Infertility Association; the Academy of Adoption and Assisted Reproduction, the Center for Reproductive Rights; the American Society for Reproductive Medicine; the National Health Law Program; the National Women’s Law Center, and numerous LGBTQ+ advocacy groups.
The Equal Access to Reproductive Care Act was introduced in the House of Representatives on June 22, 2022, and has not yet become law. However, it offers a beacon of hope to couples who want to expand their families through surrogacy but are daunted by the cost.
To learn more about what expenses may be tax- deductible when using assisted reproductive technology, and under what circumstances, please contact Brinkley Law Firm, LLC, to schedule a consultation.
