Which Surrogacy Expenses are Tax Deductible?

Surrogacy is a deeply personal and life-changing journey — emotionally, physically, and financially. For intended parents in the U.S., navigating the maze of surrogacy-related expenses can feel overwhelming, especially when it comes to taxes. Many ask: can any of these costs be deducted on a federal tax return? The short answer? It’s complicated. But let’s break it all down, no sugarcoating, just the facts.

What Surrogacy Expenses, If Any, Are Tax-Deductible?
Here’s the bottom line: the IRS does not currently recognize most surrogacy-related costs as deductible medical expenses. That’s right — the majority of the hefty bills associated with surrogacy, including agency fees, compensation to the surrogate, and legal costs, typically cannot be deducted under current federal tax law.

According to IRS Publication 502, medical expenses are deductible only for services received by the taxpayer, their spouse, or dependents. Since a gestational surrogate is not in that category, most of her medical costs aren’t deductible — even if you're footing the bill.

So, while it may seem logical that the expense of bringing a child into your family should come with some financial relief, the IRS isn’t quite there yet.

Private Letter Ruling (PLR) Process

Can You Walk Us Through the Process?

If you're thinking, “But maybe I can make a case to the IRS?” — yes, you can. That’s where the Private Letter Ruling (PLR) comes into play.

A PLR is a written response from the IRS to a taxpayer’s request for guidance on how tax laws apply to their specific situation. It's essentially you asking, “Hey IRS, will you let me deduct these expenses?” and them saying “yes” or “no,” specifically for your case.

However, applying for a PLR is not quick or cheap. It involves:

1. A formal request submitted to the IRS
2. A user fee (currently several thousand dollars)
3. Assistance from a tax attorney or CPA to prepare the submission

And the result? It only applies to you — it’s not a precedent others can use. That said, if the IRS agrees in your case, you’ll have solid legal ground to claim the deduction.

Here’s the kicker: so far, the IRS has rejected most surrogacy deduction requests via PLR. Only in very rare, specific circumstances (like if the intended parent had a documented medical condition making pregnancy impossible) has the IRS allowed it.

Egg Donation and Medical Deductions

What About Egg Donor as a Tax Deduction?

Now, this one’s a gray area — but slightly more promising.

Expenses for egg donors have occasionally been allowed as medical deductions if the eggs are used by the taxpayer or their spouse due to a medical condition. But — and it’s a big "but" — this hinges on a clear, documented medical need.

If you are in a same-sex male couple or a single man, unfortunately, the IRS hasn’t shown much flexibility here either, even if the egg donation is essential for parenthood in your case.

What Goes into a PLR Ruling?

1. Detailed explanation of the medical need for surrogacy or egg donation
2. Letters or documentation from licensed physicians
3. Full breakdown of expenses
4. Clear demonstration that the taxpayer is not seeking to profit or exploit the tax code

Most successful PLRs hinge on proving that the expense was medically necessary for the taxpayer, not simply elective or convenience-based.

You can read about tax rulings and guidance directly from the IRS here.

General Deductible Costs

What Are Some General Deductible Costs?

Let’s pivot to what can be deducted — because there is some good news.

If you’re undergoing fertility treatments yourself or your spouse is, and the treatments are medically necessary, then many of those associated costs are deductible. These include:

• IVF procedures
• Fertility medication
• Egg or sperm retrieval if used by the taxpayer or spouse
• Storage fees during active treatment
• Physician and hospital visits
• Lab fees

Still, it’s important to note that these deductions are only allowed if your total unreimbursed medical expenses exceed 7.5% of your adjusted gross income (AGI) and you itemize deductions on your tax return.

More details on this are in Publication 502, available here.

What Can Be Deducted:

1. Doctor visits for fertility assessment
2. Hormonal treatments for the intended mother
3. Sperm analysis and storage
4. IVF treatments and medications for the intended mother
5. Counseling services related to fertility treatment
6. Surgery to address infertility conditions (e.g., endometriosis, fibroids)

Egg Donor Specific Costs:

• Donor agency fees
• Egg retrieval costs
• Medical testing and donor screening
• Travel expenses for the donor (only if medically necessary and part of the donation)

Important: these deductions are still subject to the IRS’s interpretation, and they’re not guaranteed. Some taxpayers have been denied these claims even with medical documentation.

The IRS defines the rules around deductions here.

Legal and Agency Fees

A Note on Legal and Agency Fees

While legal fees related to adoption may be deductible under some state programs, most surrogacy-related legal and agency fees are not deductible under federal tax law. This includes:

• Contracts with surrogates
• Surrogacy agency costs
• Escrow account management
• Legal filings related to parentage

So yes, those $20,000–$50,000+ expenses? You’re eating them — at least from a federal tax perspective.

If your state offers tax benefits, check your local Department of Revenue: https://www.usa.gov/state-consumer

Conclusion

Surrogacy is an incredible path to parenthood, but the IRS hasn't caught up with the emotional and medical realities many families face. While some fertility-related expenses may be deductible, most surrogacy costs — especially those involving third parties like surrogates and donors — are not. The Private Letter Ruling process exists, but it’s expensive, slow, and rarely successful.

Here’s the best approach:

• Consult a tax professional early in your surrogacy planning
• Document every expense
• Keep copies of all medical records and invoices
• Review IRS resources like Publication 502
• Know your options if you’re willing to pursue a PLR

Until tax laws evolve, intended parents must balance the miracle of building a family with a pragmatic understanding of the financial and legal landscape. No frills. Just facts.