Are Egg Donor Expenses Tax Deductible?

Egg donation is a family building method which uses assisted reproductive technologies (ART). There are a variety of costs that egg recipients incur in their journey to build their families. There are medical testing and treatment costs, as well as legal fees. In addition to this, they cater for the expenses for their own medical testing and treatment costs. In addition, they compensate the egg donor for their services. These costs can run pretty high, so some tax reprieve on these expenses is of benefit to egg recipients. 

Are Egg Donor Expenses Tax Deductible?

In the tax framework, egg donor expenses are classified as medical expenses that are tax deductible. Many people have medical insurance, but this may not always cover egg donation. So before beginning the process of egg donation, a consultation with the insurance provider is helpful in clarifying the minutiae of their health insurance cover as it relates to family building.

How Egg Donor Compensation Is Classified

The law supports compensation that is received as a settlement for pain or suffering resulting from accidents or personal injuries. Legally this type of compensation cannot be taxed. While some may perceive egg donor compensation in a similar light, the compensation in this case is for a service rendered. 

The egg donor volunteers to undergo the process of egg donation with all the discomfort it may entail. This process cannot begin if the egg donor is not well informed of the process, its side effects and risks. Therefore any discomfort is not accidental, but understood as part of the medical processes necessary for egg retrieval. As well, the egg donor gives their consent before the egg donation can begin.

IRS Guidelines on Egg Donation Income

Egg donation income is compensation for undergoing the egg donation process - tests, scans, injections, medications, and egg retrieval. It also covers costs that the egg donor may incur such as transport, meals and hotel stays. Egg donation income should be filed under ‘other income’ rather than ‘earned income’, because it is not employment or business income.  As well, if the compensation is less $12,000 it is not taxable. The standard deduction for a single person filing begins from $12,000.

Can Medical Expenses Be Deducted?

Egg donation medical expenses are deductible. The deduction is on the medical expenses exceeding 7.5 percent of a person’s income, if it is more than $13,950, when itemized medical costs are included. To elaborate, find 7.5 percent of your annual income, add your egg donor medical expenses to that. The total amount of medical expenses, less 7.5 percent of the income will give you the tax deductible amount. 

Tax Filing Tips for Egg Donors

To ensure that you file your egg donor expenses correctly: 

• Seek professional tax advice
• Understand your compensation, allowances and reimbursements 
• File your egg donor income in your income tax form
• The location of egg donation and the number of times you donate could impact your tax bracket
• Multiple donations may be considered business income as self-employed individual
• File your egg donor taxes under other income if you are a full time student under the age of 24
• Keep accurate financial records

Conclusion

Understanding the financial implications of egg donation is important. Consult a certified tax advisor to get a better understanding of how to properly file your egg donor expenses of income. There are fertility centers that offer payment options for their patients relying on egg donors. Contact Dallas Fertility Center to see if you are eligible.

FAQ

Can egg donors deduct medical expenses?

Not really because all the costs incurred in egg donation are covered by the intended parents. 

Do I have to report egg donor compensation on taxes?

Yes. Egg donor compensation is taxable, so it must be reported when filing tax returns.