Is The Surrogacy Fee Taxable?

Is the surrogate fee taxable along with egg and sperm donor fees?

Become a surrogate mother and you sacrifice your body and your family. If you call the IRS you will likely get a variety of answers if you ask them about the surrogate fee taxable issue. In the end they will encourage you to pay income tax. But that doesn't mean you as the surrogate are legally obligated to do so. You could possibly claim your surrogacy as a business and deduct all the expenses including part of the house payment or rent.

In most surrogacy agreements the surrogate fee taxable issue actually becomes pay to an independent contractor, not an employee. Independent contractors fill out a business tax form and pay their own taxes on profit after deducting all their expenses. Most commercial surrogacy agencies to be safe issue an IRS form 1099, independent contractor pay. Some women show the surrogate fee taxable. Others don't report their profit as a surrogate mother. How is one supposed to add up all the expenses anyway? Are we going to deduct the master bedroom and bathroom, the car, the computer, lost wages recovering after childbirth and all the pickles, ice cream and other odd cravings and increase in caloric intake one gets when pregnant?

Most "surrogacy fee taxable" clauses in surrogacy agreements also state that the compensation is for "pain and suffering" or "pre-birth child support" both of which are rarely taxed. The written agreement will also say that taxes are entirely her problem in a surrogate fee taxable clause. It's not earned income but not a gift either. The surrogate mother is the one giving a gift it seems to me.

Regarding egg donors and sperm donors there was an IRS PLR, private letter ruling, saying it may be deductible for parents as a medical expense. Since infertility is a medical condition, helping along the pregnancy could be construed as medical care.

To me this all seems closer to being like an organ donor in a transplant operation. Are we going to require the wife to pay income tax on the estate and insurance settlement of a deceased car accident victim if his heart is used to save someones life?

Egg and sperm donation is not a product. If it was, it would be illegal because the selling of human body parts (organs and tissue) is against the law. It is also not a service currently under most peoples understanding. So, surrogacy is not yet defined by the IRS. Being an egg donor is not without pain and suffering. Shots and drugs to induce egg formation etc. Then there's the going in after the eggs. Money paid to donors could fall under compensatory damages that one receives for physical damage or illness and therefore be non-taxable income.

Sperm donors? Well, to donate means to give. Customarily, no tax. In fact, sperm donation has never been taxable. Why shouldn't the same standards apply to women. This could be construed to be both gender discrimination and an issue of violation of equal treatment under the law.

Was the cost of surrogate mother a gift with gratuitous intent?

Well, yes. The intended parents are just infertile couples seeking surrogate mother help to have a child of their own like the rest of us would if we were in their position. The alternative is adoption and that is definitely tax- deductible for the adopting parents plus employers can also deduct if they help out financially. Cost of surrogate mother and egg/sperm donation paid for by the intended parents may be deductible if the services, even though performed by people who are not medical professionals, are needed to treat the tax payer's condition of infertility. See: Internal Revenue Code Section # 214. This is especially true if intended parents are business owners or self-employed. They are currently allowed to deduct insurance premiums, deductibles paid before insurance kicks in and amounts not paid by insurance from their income up to a certain limit on their tax forms.

Really? Why should there be a double hit? Not allowing the intended parents to deduct the expense at the same time as also taxing the woman trying to profit as a surrogate mother seems unfair. Most studies have found she is actually a giving and caring person just trying to help her fellow-man. It's all by contract and there is rarely an emotional attachment between the surrogate mother and the child. Open surrogacy is when there is contact between the two after the birth. Closed surrogacy means no contact.

If the IRS decides that pain and suffering is not valid, then the amount received by the donor could be considered a gift. Currently, there is a gift limit of $10,000 per year per person. So, it may be best to pay/receive it over a two-year tax timetable. Likewise, be sure a check or wire transfer comes from each person. Again, not over $10,000 per gift giver per year is possibly deductible.

The $15,000 to $25,000 surrogate mother fee earned could possibly put her into a higher tax bracket. If the fee is paid over a two-year period then both years might go to higher tax brackets. By the way, military wives can get best compensation for surrogacy right now because their insurance still pays for hospital baby delivery but not cost of IVF, in vitro fertilization. Anyway, that means the extra money would be taxed at a higher rate. Then there is state income tax once you report it to the Feds. Over half the surrogate fee could go to the government.

The higher income level could also mean you may not qualify for Earned Income Tax Credit (if that is applicable to your situation).

All this could reduce the real surrogate fee and the benefits of surrogacy. Most women just want to become surrogate mother and thereby give the gift of life to deserving infertile couples seeking surrogate mother. The money is usually secondary. All this plus the health risk of being a surrogate mother? When you consider she is at work 24/7 for nine months straight it really amounts to just pennies per hour.

Anyway, some pay income tax some don't. You need to speak to your lawyer and tax specialist prior to starting your journey into surrogate motherhood. Truth is most surrogacy mother situations are a sacrifice for them in many ways. They themselves think of it as a gift. They are caring and big-hearted. Do they have to put up with negative ethics of surrogacy plus get confused by the "is surrogate fee taxable" debate? There have even been churches that ask surrogate mothers not to come around until after the baby is born. Then there is the wear and tear on their body and the sacrifice the family unit itself has to endure.

Why would a government tax a GIFT OF LIFE?

I don't think the legislators or the courts want to open the Roe v. Wade court case up again. When does life start? That is the debate they don't want to get mixed up in again. The Roe v. Wade decision gave women right over their own body. Birth control has helped emancipate women and that is a good thing. Shame on the Catholic Church and any one else that tries tell their members not the use birth control and to take individual freedoms away. Anti abortion and anti birth control agendas coming out of the Vatican and the right-wing of the Republican Party are tyranny in my opinion.

Is Uncle Sam watching all this? Sure they are. They are broke. The US has been funding all the bailouts and waging 2 wars at once. In fact, get ready for a national sales tax. Coming soon to a store near you.

Please read our other surrogate mother information and surrogacy issues such as surrogacy statistics, cost of surrogacy etc. Do not hesitate to contact us about your situation. We may have people in your state and area to help you in your surrogate motherhood research or a state next to you if your state has surrogacy issues.

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