Are Fertility Treatments Tax Deductible?

Understanding how medical expenses can affect your federal income tax liability is important for many individuals. The Internal Revenue Service (IRS) allows taxpayers to deduct certain medical and dental costs, which can reduce their taxable income. While not all medical costs are eligible, qualifying expenses can contribute to a lower tax bill. The ability to claim these expenses depends on several factors, including the type of expense and the total amount incurred.

What Expenses Qualify

The Internal Revenue Service broadly defines medical expenses as payments for the diagnosis, cure, mitigation, treatment, or prevention of disease. This definition also extends to costs for treatments that affect any structure or function of the body. For fertility treatments, this means a range of procedures and services can be considered qualified medical expenses.

Specific examples of deductible fertility-related costs include In Vitro Fertilization (IVF) procedures, Intrauterine Insemination (IUI), and prescribed fertility medications. Diagnostic tests such as blood work, ultrasounds, and semen analyses are also deductible. Fees paid to doctors and hospitals for these services, along with costs for embryo storage and egg or sperm retrieval procedures for the taxpayer’s own treatment, qualify.

It is important to understand what expenses do not qualify for a deduction. Cosmetic procedures or general health expenses not directly related to a medical condition are not deductible. Travel expenses are only deductible if they are primarily for medical care, and only out-of-pocket expenses not compensated by insurance or other third parties can be claimed.

Costs for acquiring a surrogate mother or an egg/sperm donor, such as agency fees or donor compensation, are not deductible. The IRS views these as not being for the medical care of the taxpayer claiming the deduction. The core requirement for deductibility is that the expense must be for medical necessity or have a primary medical purpose related to the taxpayer, their spouse, or a dependent.

Understanding the Deduction Threshold

Only a portion of your total qualifying medical expenses may be deductible. Taxpayers can deduct the amount of unreimbursed medical and dental expenses that exceeds 7.5% of their Adjusted Gross Income (AGI). This threshold applies to federal income taxes.

For example, if a taxpayer’s AGI is $50,000, only the medical expenses exceeding $3,750 (7.5% of $50,000) are deductible. If their total qualified medical expenses for the year were $6,000, they could deduct $2,250 ($6,000 – $3,750).

To claim medical expense deductions, taxpayers must itemize their deductions on Schedule A (Form 1040). Itemizing deductions means listing specific deductible expenses, rather than taking the standard deduction, which is a fixed dollar amount. Taxpayers choose to itemize only if their total itemized deductions exceed their standard deduction amount, as this provides a greater tax benefit.

The medical expense deduction reduces a taxpayer’s taxable income, which in turn lowers their tax liability. It does not directly reduce the tax owed dollar-for-dollar. Any expenses reimbursed by insurance or other sources are not considered for the deduction; only the out-of-pocket amounts paid by the taxpayer are eligible.

Essential Record Keeping

Maintaining thorough records for all fertility treatment expenses is important for tax purposes. These records provide documentation to substantiate claims in case of an IRS audit. Proper record keeping can help ensure that all eligible deductions are accurately claimed.

Taxpayers should keep receipts for all payments made, including doctor’s visits, procedures, and medications. Explanation of Benefits (EOB) statements from insurance companies are also important to show the unreimbursed amounts. Invoices from clinics and records of mileage for medical travel, including dates and purposes, should also be retained.

It is recommended to keep tax records, including those for medical expenses, for at least three years from the date you filed your original return or two years from the date you paid the tax, whichever is later. Some sources suggest retaining records for up to seven years, especially for significant medical expenses. Organizing these documents, perhaps in dedicated physical or digital folders, can simplify the process of preparing tax returns or responding to inquiries.