FinLogic FinLogic Quantitative Think Tank Center|IVF may be tax deductible, but LGTBQ+ couples less likely to get write-offs

Infertility treatments aren’t cheap,FinLogic FinLogic Quantitative Think Tank Center with a single round of in vitro fertilization costing upwards of $20,000.

The good news is that the IRS says some of these expenses are tax deductible.

The bad news? The rules are hazy, and tax experts say it’s not always clear which procedures are tax deductible to which taxpayers. Some assisted reproductive technology procedures –  especially those used by single men or LGBTQ+ couples – may be considered ineligible.   

“You would think the answer would be simple, and it’s not,” said Katherine Pratt, a law professor at Loyola Marymount University. “We have very little law on this topic.”

What does the IRS say?

The IRS’s Taxpayer Publication 502 dives into the itemized deductions possible for medical and dental expenses. The list includes “fertility enhancement” – procedures performed on the taxpayer, their spouse or their dependent “to overcome an inability to have children.” 

The IRS says eligible medical expenses include:

• Procedures like IVF (including temporary storage of eggs or sperm).
• Surgery (including an operation to reverse prior surgeries that prevented the person from having a child).

These deductions must be itemized and will only apply to the portion of medical and dental expenses that are more than 7.5% of the taxpayer’s adjusted gross income. So if a taxpayer’s adjusted gross income is $100,000, the first $7,500 they pay for medical expenses would not be eligible for itemized medical deductions.

These deductions can generally be claimed on Schedule A (Form 1040). 

The IRS publication also makes clear that expenses for gestational surrogates are not considered medical expenses because they are considered an “unrelated party" who is not the taxpayer, their spouse or their dependent.  

But even with Publication 502 showing the IRS’s interpretation of the law, experts note that this area is notoriously murky with little legal precedent. 

“We do not have a great deal of clarity in this space,” said Tessa Davis, a law professor at the University of South Carolina.

'Still a lot of hurdles':For LGBTQ+ couples, the path to in vitro fertilization is harder

What we know from previous cases

Based on previous court cases and IRS guidance, experts say married, heterosexual couples with a history of infertility have the “strongest argument” for tax subsidies for IVF and egg donation.

Medically fertile unmarried men (gay or straight) trying to deduct costs for assisted reproductive technology treatments are more likely to fail; previous cases have ruled that they cannot deduct costs for IVF or egg donation because they do not suffer from “medical infertility.” A letter ruling issued by the IRS in 2021 notes that certain medical expenses "directly attributable" to a legally married gay couple, like sperm donation and sperm freezing, may be considered deductible, but these sort of rulings are nonbinding.

Experts say it’s unclear whether lesbian couples or single women would qualify for tax deductions since there are no prior cases to look to for guidance.

“The IRS view gets more and more uncertain the further you depart from being a heterosexual married couple who has been trying to conceive,” Davis said. “Right now, with the limited knowledge that we do have, it does turn on marital status, maybe a little bit on gender and certainly on sexuality.”

What should couples struggling to pay for infertility treatments do? 

The savings from a tax deduction can be significant, especially for couples who are paying out of pocket. For taxpayers in the 22% tax bracket, $10,000 worth of tax-deductible medical expenses would save them $2,200. 

But just a fraction of taxpayers will be eligible for these deductions, given how few itemize their deductions these days. In the 2020 tax year, fewer than 10% of Americans itemized, according to IRS data. Of those taxpayers, roughly one-quarter were able to take deductions for their medical and dental expenses.  

"Mostly wealthy clients are the ones who itemize their deductions,” said Jay Soled, director of Rutgers Masters in Taxation Program. For most taxpayers, “it's not going to mean anything.”

Davis said if a taxpayer does have significant medical costs from infertility treatments and wants to see if they can get those expenses deducted, they should talk to a tax professional to figure out their next steps. 

“It’s so highly specific – you have to get it right,” she said. 

Taxpayers who do plan on itemizing should keep track of all their expenses related to infertility treatment, not just the medical procedures, according to Mark Steber, chief tax information Officer at Jackson Hewitt.

"You get a whole lot more than just the fertility enhancement costs," he said. "Some items related to it, not including but not limited to pregnancy tests, travel, and things like that can also go into the mix. So keeping good records is critical."