Egg Freezing Tax

This term does not refer to a new government levy. Instead, it describes the complex IRS tax treatment of expenses related to elective fertility preservation. For a service provider, understanding these nuances is crucial for providing accurate financial counseling and ensuring your practice’s billing is compliant and optimized.

This course will break down the IRS guidelines, clarify what is considered a medical expense, and outline strategic approaches to managing the costs associated with egg freezing.

Defining the “Egg Freezing Tax” – It’s Not What You Think

Understand the fundamental tax principle that creates the financial impact known as the “Egg Freezing Tax.”

The “Egg Freezing Tax” is a colloquial term for the IRS rule that distinguishes between medical care and personal, elective procedures for tax purposes.

• Medical Care (Tax-Advantaged): Expenses for the diagnosis, cure, mitigation, treatment, or prevention of disease are considered qualified medical expenses. This includes fertility treatments for a patient with a diagnosed medical condition like cancer (where treatment threatens fertility), endometriosis, or fallopian tube blockage.
• Elective Procedure (Not Tax-Advantaged): Expenses for procedures that are not medically necessary are considered personal. Elective egg freezing for social or age-related reasons (to preserve future optionality in the absence of a current medical diagnosis) falls into this category.

The Tax Impact: Because elective egg freezing is a personal expense, the costs are not eligible for payment using pre-tax dollars from a Flexible Spending Account (FSA) or Health Savings Account (HSA) without a specific medical diagnosis justifying it. Patients must use post-tax income, making the procedure effectively more expensive.

The IRS Guidelines – A Detailed Analysis of What Qualifies

Learn to differentiate between the components of an egg freezing cycle that may be eligible for tax-advantaged spending and those that are not.

An egg freezing cycle involves multiple line items. The IRS’s perspective is that if a component would be deductible for a medically infertile patient, it could be deductible for an elective patient, but the “why” behind the procedure is key.

Typically NOT Deductible for Elective Freezing:

• The primary procedure fee for elective oocyte cryopreservation.
• Annual storage fees for eggs frozen for elective, non-medical reasons.

Potentially Deductible (Requires Specific Circumstances):

• Medically-Induced Infertility Risk: If a patient is freezing eggs prior to chemotherapy, radiation, or a surgery that will impact ovarian function, the entire process is considered medically necessary and is FSA/HSA eligible.
• Diagnosed Infertility: If a patient has a diagnosed medical condition causing infertility (e.g., diminished ovarian reserve, premature ovarian insufficiency) and is freezing eggs as part of her treatment, the procedure is medically necessary.
• Component Parts: Some argue that certain medications and lab monitoring (blood tests, ultrasounds) are inherently “medical” and could be deductible even in an elective cycle. However, this is a gray area and carries audit risk if the primary procedure is elective. The conservative and compliant approach is to treat the entire cycle as elective unless a medical diagnosis code is provided.

Strategic Financial Planning and Practice Management

Develop protocols for patient financial counseling and internal billing to navigate these tax rules effectively.

Your role is to provide clarity, not tax advice. Partner with financial counselors to guide patients.

1. Patient Intake & Diagnosis Coding:
   • Implement a clear intake process to determine the patient’s primary reason for egg freezing.
   • For Medical Reasons: Ensure a specific, valid ICD-10 diagnosis code (e.g., Z79.3 for fertility preservation prior to cancer therapy) is attached to the patient’s file and all claims.
   • For Elective Reasons: Be transparent that the cycle will be billed as an elective procedure and that costs will likely not be eligible for FSA/HSA reimbursement.
2. Transparent Financial Counseling:
   • Provide patients with a detailed cost breakdown.
   • Advise them to consult with their tax professional or HR department to understand their specific FSA/HSA plan rules and the potential tax implications. Provide them with the necessary procedure codes (CPT codes) for their consultation.
3. Itemized Billing:
   • Use clear, itemized billing statements. This helps patients and their accountants identify which charges, if any, might be argued as deductible medical expenses (like specific blood tests).

The Evolving Landscape and Future Considerations

Stay informed about legislative changes and market trends affecting the financial aspect of egg freezing.

• State-Level Mandates: Some states are passing laws that require insurance companies to cover fertility preservation for iatrogenic (medically-induced) infertility (e.g., before cancer treatment). Stay updated on the laws in your state.
• Employer-Sponsored Benefits: A growing number of progressive companies are adding elective egg freezing coverage to their employee benefits packages. This is a direct workaround to the “tax” issue, as employer-provided benefits are not considered taxable income to the employee.
• Legislative Advocacy: There is ongoing advocacy at the federal level to change the tax code to include elective fertility preservation as a qualified medical expense. Monitor groups like RESOLVE: The National Infertility Association for updates.