Claiming In Vitro Fertilization (IVF) and other infertility treatment expenses as tax deductions may get less money back in 2018 than in previous years. April of 2019 is the first time many couples will file under the new rules under the Tax Cuts and Jobs Act (TCJA).

The new TCJA rules increase the standard deduction beginning in 2018 and lift the floor for qualifying medical and dental costs in 2019. This means that only couples with very high spending will increase the size of their refund.

Therefore, claim every possible qualified medical expenditure. Or, you may find that a Flexible Spending Account gives you more money back on your tax return.

Claiming Qualified Infertility Expenses

Many infertility treatments qualify as medical deductions. IRS publication 502 allows fertility enhancement services performed on yourself, your spouse, or your dependent to overcome an inability to have children. This may include artificial insemination, tubal ligation reversal, vasectomy reversal, IVF and other procedures.

The bigger question is whether you exceed two key thresholds (floors).

  1. Medical expenses surpass adjusted gross income percentage
    1. 2018: 7.5%
    2. 2019: 10.0%
  2. Itemized deductions surpass the standard deduction

Consult your certified public accountant. The information in this article is for information purposes only.

In Vitro Fertilization

Can you write off In Vitro Fertilization (IVF) expenses on your taxes? IRS publication 502 specifically lists IVF as tax deductible. In addition, the very high cost of this artificial reproductive technology means that many couples will exceed the two minimums.

IVF discount financing programs encourage couples to purchase multiple cycles as part of a package deal. Performing all cycles in a single calendar year can push your qualifying costs much higher – acting as a second hidden discount. For example, a married couple now needs at least $24,000 of itemized deductions before seeing any savings.

The average cost of IVF is $15,000 per cycle before the addition of any extra services such as donor eggs or sperm, cryopreservation, surrogacy, and pre-implantation genetic diagnosis. However, some of these services may not qualify.

Donor Eggs/Sperm

Are donor eggs or donor sperm for IVF tax deductible? According to IRS memo number 200318017, the answer appears to be yes. The memo indicates that services preparatory to a medical procedure qualify. This means you may be able to claim these expenses.1

  • Donor fees for time and expense in following proper procedures
  • Agency fees for procuring the donor and coordinating the transaction
  • Charges for medical and psychological testing of the egg or sperm donor
  • Insurance premiums for any medical assistance needed by the egg donor
  • Legal fees for preparing a contract between you and the egg or sperm donor

Egg Freezing

Is egg or sperm freezing for IVF tax deductible? The answer depends on whether the cryopreservation is temporary and if you have a diagnosis of infertility from a licensed doctor.2

  • Couples dealing with infertility store their eggs or sperm temporarily (short-term). These charges qualify.
  • Men and women freezing sperm or eggs to delay childbirth use cryopreservation long-term. These charges do not qualify.

Gestational Surrogate

Are surrogate expenses tax deductible in connection with IVF? According to IRS memo INFO 2002-0291, the answer appears to be no. You cannot claim a gestational surrogate or the associated legal fees.3

The IRS code allows medical deductions for the taxpayer, his or her spouse, and any dependents. A surrogate mother does not meet this definition.

Pre-implantation Genetic Diagnosis

Pre-implantation Genetic Diagnosis (PGD) may be tax deductible as a laboratory fee. IRS publication 502 indicates that you can include the amounts you pay for laboratory fees that are part of medical care. PGD screens for defects with embryos.

PGD biopsies and tests are very expensive ($4,000 to $9,000). These added costs can help you meet the two important floors (see below).

Out-of-Pocket Medical

Make the most of your infertility treatment itemized tax deductions by claiming every other out-of-pocket medical expense. Remember, you need to meet two key thresholds before getting any money back.

Make sure to include all qualifying costs you may incur during the year on Schedule A.

How Much You Get Back in Taxes

How much money do you get back in taxes for IVF and other infertility treatments? Only your accountant knows for sure. Six primary variables affect the amount you get back on your refund – if any at all.

  1. Size of your standard deduction
  2. Total of all itemized deductions
  3. Marginal tax bracket
  4. Amount of qualified medical and dental
  5. Adjusted gross income
  6. Amount withheld from paycheck during the year

For many couples, a Flexible Spending Account will provide greater tax reductions than claims using Schedule A because of the first dollar savings benefit.

Schedule A

The amount of money you get back in taxes for IVF and other infertility treatments using Schedule A will be lower for 2018 and lower still for 2019. The TJCA rules impact the medical expense percentages and the standard deduction amounts.4

Medical Expenses

First, Schedule A limits the amount of money you get back for infertility treatments. Only the amounts of your total unreimbursed medical expenses above a set floor count towards your itemized deductions.

Adjusted Gross Income (AGI) percentage

  • 2018: 7.5%
  • 2019: 10.0%
  • 2020: 10.0%

Standard Deduction

Second, the total of all of your itemized expenses on Schedule A must exceed your standard deduction in order to get any money back from infertility treatment costs.

Standard Deduction20172018/2019
Single$6,350$12,000
Married/Joint$12,700$24,000
Married/Separate$6,350$12,000
Head of Household$9,350$18,000

Schedule A lists six categories of itemized expenses.

  1. Medical and dental
  2. Taxes you paid
  3. Interest you paid
  4. Gifts to charity
  5. Casualty and theft loss
  6. Other itemized deductions

Couples living in high tax states such as California, Illinois, New Jersey, and New York will find it harder to reach the threshold. The TJCA rules also limit the amount of state and local taxes people can claim on Schedule A.

Flexible Spending

Flexible Spending Accounts (FSA) will often get more money back on taxes for IVF and infertility treatment costs. You do not have to meet the two floors noted above and you avoid paying FICA taxes.

  • An FSA provides first dollar tax savings. The pretax payroll elections reduce the amount of income reported on your W2 at the end of the year. This negates the two thresholds.
  • An FSA reduces FICA taxes paid. The pretax payroll elections reduce the amount of income subject to FICA for the employee and employer (up to 7.65% each).

The annual FSA contribution limits are the primary drawback. A husband and wife can both contribute up to $2,700 as of 2019, or a total of $5,400 if both spouses have access at work.

Tax Credit

Senator Kirsten Gillibrand introduced the Family Act of 2013 S.881. The bill proposed to amend the Internal Revenue Code to allow a tax credit for 50% of “qualified infertility treatment expenses.”  The bill defines these expenses as amounts paid for the treatment of infertility via In Vitro Fertilization (IVF).5

A tax credit is an amount of money you can subtract from your tax obligation. A credit is worth more than a deduction because you have no spending thresholds to meet.

However, the Senate never passed the bill. Therefore, as of January 2019, you cannot claim a tax credit – just a deduction subject to the limitations noted above.

Sources:

  1. IRS Memo 200318017
  2. IRS Publication 502
  3. IRS Memo INFO 2002-0291
  4. IRS Publication 5307
  5. Family Act S.881
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