In a new private letter ruling, the IRS said that in vitro fertilization (IVF) expenses for a surrogate on behalf of a married couple are not deductible by the couple as a medical expense under the tax code (PLR 202505002, 1/31/25). Although a private letter ruling is legally binding only on the taxpayer who requested it, this is a strong indicator of how the IRS would address similar situations.
Previously, the IRS has established that IVF expenses incurred by heterosexual taxpayers are generally deductible as medical expenses, but comparable expenses of all-male couples are usually not. But there is still considerable “gray area” regarding these deductions.
Basic rules: According to IRS Publication 502, Medical and Dental Expenses, medical expenses are costs incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists and other medical practitioners. In addition, you can count the costs of equipment, supplies and diagnostic devices needed for these purposes.
Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. They don’t include expenses that are merely beneficial to general health, such as vitamins or a vacation.
The amount you can deduct each year on your return is limited to the excess qualified expenses above 7.5% of your adjusted gross income (AGI). For example, if you have an AGI of $100,000 and qualified expenses of $8,000, you can deduct just $500. So, every last dollar is important.
Facts of the ruling: The taxpayers are a legally married heterosexual couple. Due to the wife’s medical condition, the couple could not pursue a traditional pregnancy. Instead, they arranged to use IVF with the husband’s sperm and a donated egg to allow a gestational surrogate to carry the pregnancy.
The couple requesting a ruling from the IRS on deducting various costs involved in this process, including the following:
- Medical expenses directly attributed to both spouses;
- Egg donor related costs;
- Medical expenses of sperm donation;
- Sperm freezing;
- IVF medical costs (expenses of embryo creation and storage)
- Childbirth expenses related for the surrogate;
- Surrogate medical insurance related to the pregnancy;
- Legal and agency fees for the surrogacy; and
- Any other medical expenses arising from the surrogacy.
In reaching a conclusion, the IRS cited several cases denying deductions for reproductive technology expenses, like IVF and surrogacy, when the taxpayer (or spouse or dependent) didn’t personally use the technology or have a medical condition requiring its use. Furthermore, it noted that the expenses in question are not for the medical care of the taxpayer (or spouse or dependent). Finally, the IRS emphasized that the medical procedures affect the structure or a function of a third party—not the couple.
Accordingly, the IRS denied deductions for all the IVF and surrogacy expenses claimed by the couple except for their own direct medical expenses, such as sperm donation expenses.
Caveat: The tax law in this area hasn’t quite kept up with all the latest technological advances and is still evolving. Keep a watch out for new developments.
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Tags: 2025 taxes, deductions, in vitro fertilization, ivf, tax court, Taxes