Is Egg Freezing Tax Deductible? What You Need to Know
Explore the tax implications of egg freezing, including IRS criteria, eligible costs, and state tax differences.
Egg freezing has become an increasingly popular option for individuals looking to preserve their fertility, but the financial implications can be significant. A common question arises: Is egg freezing tax deductible?
IRS Criteria for Medical Expenses
The Internal Revenue Service (IRS) provides guidelines to determine which medical expenses are deductible. According to IRS Publication 502, deductible medical costs include those for the diagnosis, treatment, or prevention of disease, as well as procedures affecting any part or function of the body. Fertility treatments like egg freezing, however, fall into a gray area. While the IRS has not explicitly categorized egg freezing as deductible, it may qualify if deemed medically necessary, such as for preserving fertility before undergoing chemotherapy. Elective procedures generally do not meet the IRS’s criteria.
Only medical expenses exceeding 7.5% of a taxpayer’s adjusted gross income (AGI) are deductible. For example, if your AGI is $100,000, only medical expenses above $7,500 are eligible. Calculating whether total medical expenses surpass this threshold is key to determining potential tax benefits.
Eligible Costs in Fertility Treatments
Understanding which fertility treatment expenses qualify for tax deductions is critical. Deductible costs often extend beyond the procedure itself. Consultations with fertility specialists, diagnostic tests, and necessary medications are typically considered part of treatment and may qualify. Transportation costs to and from medical appointments, including mileage, parking fees, and lodging for overnight stays, can also be deducted.
The cost of storing frozen eggs may be deductible if deemed medically necessary, such as for individuals undergoing long-term medical treatments. However, since the IRS has not specifically addressed storage fees for fertility treatments, consulting a tax professional is highly recommended. Keeping detailed records of all related expenses ensures compliance with IRS guidelines.
Itemizing and Threshold Considerations
Maximizing deductions for fertility-related expenses requires understanding whether to itemize or take the standard deduction. For 2024, the standard deduction is $13,850 for single filers and $27,700 for married couples filing jointly. Only if total itemized deductions, including medical expenses, exceed these amounts is itemizing advantageous.
Medical deductions are only applicable to expenses exceeding 7.5% of AGI. For taxpayers with substantial out-of-pocket costs, such as multiple fertility treatments, itemizing may provide significant tax savings. A strategic approach involves calculating all potential deductions, including mortgage interest, state and local taxes, and charitable contributions, to determine whether itemizing is beneficial. Monitoring legislative changes that could alter thresholds or eligibility is also important.
Required Supporting Records
Thorough documentation is essential for claiming deductions for fertility-related expenses. Taxpayers should maintain receipts, invoices, and statements from medical providers that detail the services rendered and their costs. This documentation substantiates the legitimacy of claimed expenses and provides a clear trail in case of an audit.
For travel-related deductions, keep mileage logs, parking receipts, and accommodation bills for overnight stays. If claiming storage fees for frozen eggs, retain documentation from the storage facility specifying costs and duration. Accurate and contemporaneous recordkeeping is critical to ensure compliance with tax laws.
Differences in State Tax Rules
While federal tax guidelines provide a baseline for deductible medical expenses, state tax rules can differ significantly. Some states fully conform to federal standards, including the 7.5% AGI threshold, while others impose stricter criteria. For example, California may exclude elective procedures like egg freezing unless deemed medically necessary. In contrast, New York might allow broader deductions for fertility-related costs under certain conditions.
In states without income tax, such as Texas and Florida, state-specific medical deductions are irrelevant. For taxpayers in states with income tax, consulting a tax professional or the state’s Department of Revenue is essential to identify any unique opportunities or limitations. Additionally, some states offer tax credits or incentives for fertility treatments, which could further reduce costs.