If you’re considering or in the midst of a surrogacy journey in the U.S., one question you’ll likely ask is: “Can I deduct the costs of surrogacy on my taxes?” Unfortunately, the answer is largely “no” under current federal tax rules—but there are nuances worth understanding. Knowing these will help you plan financially, talk to your CPA, and avoid nasty tax surprises.
1. What the IRS Says: The Federal Rules
The fundamental rule about medical expense deductions is in Internal Revenue Code (IRC) §213 and IRS Publication 502. The key requirement: taxpayers can deduct medical expenses paid for the taxpayer, their spouse, or a dependent, if those expenses are for the diagnosis, cure, mitigation, treatment or prevention of disease, or for affecting any structure or function of the body.
In recent years, the IRS has made it clear via private letter rulings that many surrogacy-related costs do not meet the deduction criteria. For example:
- In PLR 202505002 (Jan 31 2025), the IRS ruled that almost all expenses tied to a gestational surrogacy arrangement—including surrogate compensation, surrogate medical costs, legal and agency fees—were not deductible because they were expenses for third-parties, not the intended parent.
- Prior rulings (such as PLR 200214001) similarly denied deductions for egg donors, IVF when the intended parent did not carry the pregnancy, and surrogacy expenses.
- Summaries of tax guides show: “Expenses for a surrogate, egg donor or their medical care are not deductible… medical treatment directly on the taxpayer or spouse may be deductible.”
Bottom line: for most intended parents, the large majority of surrogacy expenses—compensation to the surrogate, agency fees, legal drafting of the surrogacy contract, surrogate’s medical bills—cannot be deducted.
2. What Can Be Deductible?
While many surrogacy costs are not deductible, there are some fertility-related medical costs for the intended parent that may be deductible if they meet the criteria. These include:
- IVF (in vitro fertilization), egg retrieval, sperm donation/freezing, when they are directly performed on the intended parent or spouse.
- Medical diagnosis and treatment for infertility that affects the taxpayer or spouse’s body function.
- Travel, lodging and related medical expenses tied to procedures directly involving the taxpayer or spouse—provided they qualify and you itemize.
For example, if you, as the intended parent, undergo IVF because you have infertility, those medical costs might be deductible if you itemize and your total medical expenses exceed 7.5% of your Adjusted Gross Income (AGI).
However: once the process involves a surrogate carrying your embryo, many of the costs shift into “third-party” territory and are disallowed.
3. Community Experiences & Real Voices
On Reddit and other forums, intended parents share their struggles and frustrations:
“Costs related to surrogacy, i.e. their compensation, medical bills, etc., are generally not tax deductible because they are a third party.”
“This ruling affects U.S. taxpayers involved in the surrogacy process… the child and the surrogate are third parties and thus many costs don’t qualify.”
These real-world voices match the official guidance: many go in hoping for tax relief, and walk away disappointed or working with CPA’s to pull out whatever minimal deduction they can.
4. Key Financial Planning Takeaways
Given the current tax environment, here are concrete steps you should consider:
- Consult a CPA experienced in fertility/surrogacy tax issues.
Because private letter rulings are specific to individual taxpayers and are not precedent, each case is unique. - Keep detailed documentation.
For deductible medical costs you incur (IVF, fertility treatments for you/spouse), keep receipts, superbills, doctor letters, etc. - Itemize only if it benefits you.
Medical expense deductions only apply if you itemize and your eligible expenses exceed 7.5% of AGI. Many intended parents opt for standard deduction instead because it is more beneficial. - Understand what won’t be deductible.
- Surrogate compensation & expenses
- Agency match fees and administration
- Legal fees related to parentage or contracts (unless possibly tied to deductible medical treatment, but very risky)
- Surrogate’s medical insurance or delivery costs
- Explore alternative strategies.
- Use HSA/FSA funds for eligible fertility treatments for the intended parent.
- Some employers may offer surrogacy benefits (though they often are taxable).
- Consider philanthropic grants or loans specific to surrogacy.
- Stay updated on law changes.
Fertility- and surrogacy-related tax law is evolving. What is not deductible today may change, but don’t rely on speculation.
5. Example: What an Intended Parent Could Deduct
Let’s say you and your spouse are the intended parents. You undergo IVF treatments yourself (egg retrieval, embryo creation) and document the costs. Later you engage a gestational surrogate to carry. According to current IRS guidance:
- You can attempt to deduct the IVF costs incurred directly by you within the usual medical expense rules.
- You cannot deduct the surrogate’s compensation, the cost of her medical insurance, your agency fees or legal fees for the surrogacy contract since the surrogate is a third party.
- If you want a stronger chance of deductibility for unusual costs, you could request a Private Letter Ruling—but this is expensive and no guarantee.
6. Conclusion
In short: while the path to parenthood via surrogacy can be deeply meaningful, the associated costs are significant—and tax relief is minimal under current U.S. federal law. Understanding the distinction between what you incur as medical treatment on your own body (which may qualify) versus what costs involve third parties (which typically don’t) is key.
Don’t go in assuming broad tax deductions. Instead, work with a qualified tax advisor, keep excellent records, and plan your finances with realistic expectations. With the right preparation, you’ll carry your journey forward with clearer vision and fewer surprises.
