IRS approves medical deduction for IVF, denies it for surrogacy

Editor: Michael J. Mondelli, J.D.

On May 2, 2025, the IRS released a determination letter (Letter Ruling 202518023, issued Feb. 4, 2025), clarifying the scope of the medical expense deduction under Sec. 213 for in vitro fertilization (IVF) and gestational surrogacy expenses. This ruling represents much–needed guidance for taxpayers who are navigating the complex area of medical deductions for assisted reproductive technologies, particularly in distinguishing between IVF and surrogacy costs.

Medical expense deductions under Sec. 213

Under Sec. 213(a), taxpayers may deduct expenses paid during the tax year for medical care, provided these expenses are not compensated by insurance or otherwise. The deduction is available for medical care of the taxpayer, the taxpayer’s spouse, or a dependent, to the extent that the total medical expenses exceed 7.5% of the taxpayer’s adjusted gross income (AGI).

The definition of “medical care” under Sec. 213(d)(1) is relatively broad, including 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 (Sec. 213(d)(1)(A)).

IRS determination letter: IVF vs. surrogacy expenses

In the ruling, a married couple sought to deduct expenses related to both IVF procedures and gestational surrogacy. The IVF process included expenses for screenings, fertility medication and treatments, and egg and sperm retrieval, all performed on the taxpayers. Due to a preexisting condition posing a high risk of uterine rupture, the couple also engaged a third–party gestational carrier to carry their biological child to term, resulting in additional expenses including for the surrogate’s medical care, insurance premiums, legal fees, and compensation.

The IRS allowed a deduction for the taxpayer’s unreimbursed IVF–related expenses, including screenings, fertility medication and treatments, and sperm and egg retrieval, to the extent they exceeded 7.5% of the taxpayers’ AGI. The Service determined that these expenses directly affected the structures or functions of the taxpayers’ bodies, thus satisfying the statutory definition of “medical care” under Secs. 213(a) and (d)(1)(A).

The IRS denied a deduction for the surrogacy expenses the taxpayers incurred because they were incurred for the medical care of a third party, the gestational carrier, and thus did not meet the Sec. 213(a) requirement that the medical care be for the taxpayer, the taxpayer’s spouse, or dependent.

Legal analysis and precedent

The IRS’s reasoning should also be understood in the light of prior court decisions, including Magdalin, T.C. Memo. 2008–293, aff’d, No. 09–1153 (1st Cir. 12/17/09), and Morrissey, 871 F.3d 1260 (11th Cir. 2017), aff’g 226 F. Supp. 3d 1338 (M.D. Fla. 2016). In Magdalin, the Tax Court held, and the First Circuit affirmed, that the taxpayer was not entitled to a medical deduction for IVF expenditures because he had no medical condition or defect requiring IVF. Thus, the procedure did not prevent or alleviate a physical or mental defect or illness, as required under Sec. 213(d)(1)(A) and Regs. Sec. 1.213–1(e)(1)(ii).

Similarly, in Morrissey, the taxpayer claimed a deduction for both IVF and surrogacy expenses. The taxpayer, a homosexual man, sought to have a child with his male life partner. Like the taxpayer in Magdalin, the taxpayer was not infertile and had no medical condition or defect requiring IVF. However, he claimed that the IRS’s denying the deduction for IVF–related expenses violated his constitutional right to equal protection of the laws on two separate bases: It infringed upon his fundamental right to reproduce, and it discriminated against him based on sexual orientation. The Eleventh Circuit held that the IVF and surrogacy expenses were not deductible because they were not necessary medical care of the taxpayer and that the IRS did not violate the Constitution in disallowing the taxpayer’s medical expense deduction.

Practical implications

Taxpayers who are considering assisted reproductive technologies, including IVF or surrogacy, should be careful in distinguishing between the two when calculating medical deductions. According to the IRS, while IVF–related expenses, such as fertility treatments and sperm and egg retrieval, are deductible under Sec. 213 if they meet the applicable thresholds, expenses related to a gestational surrogate, including medical care, insurance, and compensation are not.

As such, maintaining clear documentation of the specific nature of each expense is vital for substantiating the claim and avoiding unnecessary administrative headaches with the IRS. Taxpayers should also consult with tax professionals to ensure compliance with these rules, especially given the intricacies of medical deductions and the fine distinctions between what qualifies as a deductible expense for personal medical care versus third–party services.

The letter ruling thus clarifies a significant issue in the realm of medical expense deductions: While certain IVF–related expenses may be deducted under Sec. 213, third–party related expenses associated with gestational surrogacy are not deductible. Taxpayers participating in IVF or surrogacy should carefully evaluate their eligibility for Sec. 213 medical expense deductions and work closely with a tax adviser to ensure they are maximizing their allowable deductions while still adhering to ongoing IRS guidelines.

Editor

Michael J. Mondelli, J.D., is a director in the Tax Advisory Group, with SingerLewak LLP in Irvine, Calif.

For additional information about these items, contact Mondelli at mmondelli@singerlewak.com.

Contributors are members of or associated with SingerLewak LLP.