Are Surrogacy Expenses Tax Deductible? (USA — 2025)

At the federal level, surrogacy-related costs paid for someone who is not the taxpayer, a spouse, or a claimed dependent are generally NOT deductible. However, many costs for an intended parent’s own diagnosis and treatment (e.g., IVF performed on the intended parent, fertility preservation before cancer treatment) can qualify as medical expenses if itemized and exceeding 7.5% of AGI. This blog provides a comprehensive guide to federal tax rules, state tax credits, and health insurance mandates around surrogacy, egg donation, and IVF.

Quick Q&A

Q. Are surrogacy expenses tax deductible?

A. Generally no. The IRS allows deductions only for the taxpayer, spouse, or dependents. Expenses for a surrogate, egg donor, or their medical care are not deductible.

Q. If not, how can I make surrogacy expenses tax deductible?

• Deduct your own fertility care (IVF, egg retrieval, fertility preservation).
• Use HSA/FSA/HRA funds for your eligible care.
• Employer surrogacy stipends are usually taxable, but still offset costs.

Q. Would a letter showing medical necessity and a superbill from my physician help with deductions?

A. Yes — for your own fertility treatment. These documents substantiate IVF/fertility preservation as medically necessary, supporting IRS and insurance claims.

Q. Would that also help with insurance reimbursements?

A. Yes, for your own IVF/fertility preservation. But most insurance policies explicitly exclude surrogate maternity care.

Federal Tax Law: What’s Allowed and What’s Not

Deductible for Intended Parents

• Infertility diagnosis and treatment for you or your spouse.
• IVF performed on the intended parent.
• Fertility preservation related to cancer or medical treatment.
• Transportation and certain lodging costs tied to treatment.

Not Deductible

• Surrogate compensation.
• Surrogate’s medical care, insurance, prenatal, and delivery costs.
• Egg donor compensation and medical expenses.
• Agency and legal fees related to surrogacy.

State Tax Credits and Deductions (Surrogacy, Egg Donation, IVF)

As of 2025, no state offers specific deductions or credits for surrogacy or egg donation costs. Some states mandate or propose credits for IVF (e.g., New York has a pending IVF credit proposal). General medical deductions may apply in states like New Jersey (2% of gross income) and California (conforms to federal).

• No state income tax: AK, FL, NV, NH, SD, TN, TX, WA, WY.
• NJ: deduction for unreimbursed medical >2% of state GI.
• CA: generally follows federal itemized deductions.
• NY: proposed refundable IVF credit (not enacted yet).

State Insurance Mandates for Fertility Coverage

Over 20 states require certain health insurers to cover infertility diagnosis and/or IVF. However, no state mandates coverage for surrogacy or egg donor compensation.

Examples of State IVF Mandates

• Massachusetts: requires IVF coverage with no cycle limit; excludes surrogacy.
• New Jersey: covers up to 4 egg retrievals through age 45.
• Connecticut & Illinois: require IVF coverage; limits vary.
• New York: large-group plans must cover 3 IVF cycles; surrogacy excluded.

Each mandate applies only to state-regulated insurance — not self-insured employer plans governed by ERISA.

Medicare and Medicaid

Medicare does not cover fertility treatment, surrogacy, or egg donation. Medicaid generally excludes infertility treatment. A few states may offer limited infertility grants or pilots, but these do not cover surrogacy.

Affordable Care Act (Obamacare)

The ACA’s Essential Health Benefits do not require fertility coverage nationwide. However, marketplace plans must comply with state mandates, so IVF is included in states with infertility coverage laws. Surrogacy remains excluded.

How to Get Insurance to Pay

• Obtain a letter of medical necessity for IVF/fertility preservation.
• Submit a coded superbill (CPT/ICD-10) for your care.
• Appeal insurance denials with supporting medical documentation.
• Understand state-specific limits (e.g., number of cycles, age caps).

Taxes for Surrogates and Egg Donors

• Surrogates: compensation is taxable income; may or may not be subject to self-employment tax.
• Egg donors: compensation is taxable income (per Tax Court rulings).

How Surrogacy4All Can Help

• Provide medical necessity letters and coded superbills.
• Coordinate with insurers to maximize reimbursement.
• Refer to CPAs for fertility tax planning.
• Guide you through surrogacy, egg donation, and IVF options with licensed, physician-led support.

Contact: support@surrogacy4all.com | 212-420-9200 | www.Surrogacy4All.com

Disclaimer: This blog is for educational purposes only. Always consult a CPA, attorney, or licensed insurance expert for personalized guidance.