IRS Letter Addresses Deductibility of In Vitro Fertilization Expenses

The agency issued the letter in response to a request by a married male same sex couple (the “taxpayers”) planning to have a child using the sperm of one spouse and the egg of the other spouse’s sister, with an unrelated surrogate carrying the child to term. The couple sought a ruling as to whether they could deduct the expenses for the sperm donation and freezing, egg retrieval, and IVF process, as well as the childbirth, medical and legal expenses related to the surrogacy.

Code Section 213 permits a taxpayer to deduct expenses paid for medical care that exceed 7.5% of the taxpayer's adjusted gross income. Medical care 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.”

In the ruling, the IRS emphasizes that expenses eligible for the Code Section 213 deduction are limited to those of the taxpayer, the taxpayer’s spouse and/or the taxpayer’s dependent. Recent tax court precedents are cited in support of this position.

Accordingly, the letter concludes that expenses involving the egg donation, IVF process and gestational surrogacy are not deductible expenses for the taxpayers. I.e., these costs incurred by third parties are not incurred for treatment of a disease or for the purpose of affecting any structure or function of the taxpayers’ bodies.

However, the medical costs paid for medical care directly attributable to the taxpayers, including the sperm donation and sperm freezing, are deductible medical expenses (subject to the above noted adjusted gross income limitation).

Although the ruling technically only apples to the requesting taxpayers, employers who offer IVF benefits may want to be aware of the recent IRS release.

Private Letter Ruling 202114001 »