What Are The Tax Implications For US Intended Parents?
Check out this rarely addressed topic in this article by Lawrence R. Pappas, CPA, P.C.
Surrogate mothers’ expenses are not specifically addressed in the IRC or in other regulations. Under current tax law, the only place that a surrogate fee could be deducted is as a medical expense. However, consider the following:
- Medical deductions are allowed only for the medical care of the taxpayer and his or her spouse and dependents (IRC Sec 213(a)).
- These expenses must be for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body (IRC Sec 213(a)(1)(A)).
A surrogate mother is, by definition, neither the taxpayer nor the taxpayer’s spouse, and she is typically not a dependent, either. An unborn child is also not a dependent (Cassman v. United States, 31 Fed. Cl. 121 (1994)). Thus, medical expenses paid to a surrogate mother and her unborn child do not qualify for a medical deduction.
This fee also cannot be construed as a treatment for a female taxpayer’s inability to conceive.
Thus, the new parents cannot deduct the surrogacy fee or any agency fees, legal fees, and medical expenses for the surrogate mother and unborn fetus.
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