Are Surrogacy Agency Fees Tax Deductible?

The cost of surrogacy can be overwhelming — and understanding its tax implications only adds to the complexity. Intended parents navigating this process often ask: Are any of these substantial expenses tax deductible? The short answer is complicated, and in most cases, disappointing. However, with a clearer grasp of IRS guidelines and strategic financial planning, you may be able to recover part of the cost.

This guide provides a detailed breakdown of what the IRS considers “qualified” medical expenses, how those apply to fertility treatments, and where surrogacy costs fit in — or don’t. It also explores state-level exceptions, documentation strategies, and alternative financial tools to help offset costs. If you’re planning your surrogacy journey, the insights here can help you take confident, informed steps forward.

Are Surrogacy Agency Fees Tax Deductible?

Surrogacy agency fees are not tax deductible under current IRS guidance. These agencies handle everything from matching intended parents with a surrogate to managing the logistics, legal coordination, and medical scheduling. While these services are essential to a successful surrogacy journey, the IRS classifies them as administrative rather than medical expenses.

Only certain medical expenses — defined narrowly by the IRS — qualify for deductions. Agency services, no matter how critical they are to the surrogacy process, fall outside that scope. Recognizing this early helps prevent unrealistic expectations and enables intended parents to make informed financial decisions.

Are Any Surrogacy-Related Expenses Tax Deductible?

Some are — but only if they meet very specific IRS criteria. Generally, only medical expenses that directly involve the intended parent may be eligible. The IRS considers medical costs deductible only if they are primarily to diagnose, cure, mitigate, treat, or prevent a disease, and are incurred for the taxpayer, their spouse, or a legal dependent.

Fertility-Related Expenses That May Qualify

• In vitro fertilization (IVF) procedures for the intended parent
• Egg retrieval and embryo creation done for the intended parent
• Cryopreservation of embryos (when medically necessary)
• Hormone treatments and medications related to infertility
• Medical consultations and fertility clinic visits

These expenses are often incurred before a surrogate is brought into the process, making them more likely to meet deduction criteria. Even if a prior IVF attempt failed, those costs can still be deducted if you itemize your tax return. However, using the standard deduction will eliminate eligibility for these write-offs.

To explore further examples of what may qualify, review this guide to IVF and surrogacy tax write-offs.

Surrogacy Expenses That Are Not Deductible

IRS rules prohibit deductions for expenses related to another person’s medical care unless that person is your legal dependent. Because a gestational surrogate is not legally tied to the intended parent in this way, most costs directly associated with her are disallowed. These include:

• Surrogate base compensation and allowances
• Medical expenses incurred by the surrogate
• Surrogacy agency coordination and management fees
• Legal fees related to drafting contracts and parentage orders
• Travel and lodging for the surrogate

Even though these expenses are integral to creating a family, they are not recognized as deductible medical care under federal tax law. This distinction is a significant source of frustration for many intended parents.

Why the IRS Disallows Most Surrogacy Deductions

IRS Publication 502 spells out what qualifies as a medical expense. The taxpayer must be the one receiving treatment — or it must be their spouse or legal dependent. Since surrogates do not meet that definition, even necessary medical care associated with pregnancy and birth is excluded from deduction eligibility.

The IRS also views legal and agency services as non-medical, no matter how essential they are. Payments for legal documents, surrogacy coordination, escrow management, and background checks all fall under this administrative umbrella.

How the Courts Have Interpreted These Rules

Several legal challenges have been brought by intended parents seeking to claim surrogacy expenses as deductions. However, tax courts have consistently upheld the IRS’s stance. Even when infertility was recognized as a valid medical condition, expenses paid to a surrogate — or on her behalf — were deemed non-deductible.

This legal precedent underscores the importance of understanding what can and cannot be written off. It also highlights the ongoing gap between modern family-building options and outdated tax codes that have not evolved to reflect them.

Are There State-Level Surrogacy Tax Benefits?

Some states have introduced or proposed legislation offering tax credits, deductions, or grants for certain fertility treatments. These often stop short of including surrogacy, but they can still provide partial relief, especially if you’re undergoing IVF or egg retrieval.

Examples of State-Specific Programs

• Massachusetts: Proposed a state-level IVF tax credit
• California: Allows some deductions for fertility preservation under certain medical conditions
• New York: Offers partial reimbursement for IVF through state-backed programs

These programs vary widely in scope, requirements, and accessibility. Many are income-based and apply only to procedures performed on the intended parent. Surrogacy-related expenses are rarely covered, but it’s worth investigating your specific state’s programs annually.

How to Find the Right CPA for Surrogacy Tax Planning

General accountants may not be equipped to handle the nuances of fertility and surrogacy-related deductions. It’s essential to work with a certified public accountant (CPA) who has direct experience with reproductive healthcare and complex medical deductions.

What to Look For in a Tax Professional

• Demonstrated expertise in applying IRS rules to fertility-related medical expenses, including IVF, embryo creation, and associated treatments for intended parents
• Thorough knowledge of IRS Publication 502 and judicial precedent regarding the deductibility of medical and surrogacy-related expenses under Section 213 of the Internal Revenue Code
• In-depth familiarity with state-level tax benefits, including fertility-related credits, deductions, and grant programs that vary by jurisdiction and may impact overall out-of-pocket costs for intended parents

Questions to Ask Your CPA

• What specific fertility and medical care costs—such as IVF, hormone treatments, and diagnostic procedures—are considered qualified medical expenses under current IRS guidelines, and how can I document them to ensure eligibility?
• Are medical expenses from previous years—such as IVF procedures or fertility treatments—still deductible if they relate to a multi-year family-building process and meet IRS timing and documentation requirements?
• Should I opt to itemize my deductions—potentially allowing me to claim eligible fertility-related medical costs—or will I receive greater overall tax benefit by taking the standard deduction, considering my total expenses and filing status?
• What is the most effective way to organize and securely retain detailed receipts, invoices, and related documentation for fertility and medical expenses to meet IRS substantiation requirements in the event of an audit?
• What documentation and tax reporting obligations apply when receiving employer-provided fertility benefits or nonprofit grants, including whether these funds are considered taxable income under IRS rules or must be disclosed on your federal return?

Documentation to Maintain

• Detailed invoices from fertility clinics and laboratories documenting all procedures, diagnostic services, and clinical support billed to the intended parent;
• Itemized pharmacy receipts and prescription records for hormone therapies and related medications prescribed during fertility treatments;
• Executed legal contracts and attorney billing statements for surrogacy-related services, including gestational agreements and parentage establishment;
• Dated travel logs, transportation receipts, and lodging invoices for appointments tied to eligible fertility procedures performed on the intended parent;
• Financial statements and payment confirmations for embryo creation, freezing, and cryopreservation processes conducted prior to or in preparation for surrogacy

Accurate documentation is vital to defend your deductions if audited and to ensure nothing is missed when filing.

Other Ways to Manage Surrogacy Costs

While most surrogacy expenses do not qualify for tax deductions, intended parents can still leverage alternative financial strategies — such as tax-advantaged accounts, employer-sponsored benefits, medical financing, and nonprofit grants — to reduce their total out-of-pocket burden and make the surrogacy journey more financially sustainable.

Flexible Spending Accounts (FSAs)

Flexible Spending Accounts (FSAs) allow employees to allocate pre-tax income for eligible medical expenses, and while these accounts cannot be used for surrogate-related costs, they can significantly reduce out-of-pocket expenses for IVF procedures, fertility-related medications, and diagnostic testing incurred directly by the intended parent, as defined under IRS Publication 502.

Health Savings Accounts (HSAs)

Health Savings Accounts (HSAs) allow individuals with high-deductible health plans to contribute pre-tax funds toward qualifying medical expenses, including fertility-related services such as IVF, medications, and lab work performed on the intended parent, provided they meet the definitions outlined in IRS Publication 502.

Fertility Financing Loans

Surrogacy financing programs designed for fertility care offer structured repayment plans that can ease upfront financial stress, especially when sourced from lenders familiar with complex treatments like IVF, embryo transfer, and surrogacy-related coordination — ensuring the provider understands the timing, billing, and documentation requirements unique to third-party reproduction.

Grants and Nonprofit Assistance

Nonprofits like Baby Quest Foundation and Journey to Parenthood offer need-based grants that may be used toward IVF and surrogacy-related costs. These programs are competitive, so early application and complete documentation are essential.

Employer Fertility Benefits

A growing number of employers now offer stipends or reimbursements for fertility-related expenses, and some extend this support to surrogacy. These benefits may include:

• One-time grants or stipends
• Insurance plans that cover IVF or embryo freezing
• Reimbursement for legal or agency fees

Talk with your HR department to find out what benefits you may qualify for and whether any reimbursements can be retroactive.

Crowdfunding and Peer Support

Crowdfunding platforms such as GoFundMe and Gift of Parenthood offer intended parents a means to offset surrogacy costs by engaging their personal networks and broader communities, but it is important to clearly disclose the intended use of funds and consult a qualified tax advisor to determine whether contributions may be considered taxable income or require documentation under IRS gift reporting rules.

Tax Deductions and Smart Planning

While surrogacy agency fees and related expenses are generally not tax deductible, there are ways to reduce your financial burden. Understanding what qualifies under IRS guidelines, keeping meticulous records, and working with an experienced CPA can help you maximize eligible deductions.

Supplement your tax strategy with tools like FSAs, HSAs, financing options, and employer benefits. And don’t overlook local programs and nonprofit grants that may offer additional support. Strategic planning won’t eliminate the high cost of surrogacy — but it can help you manage it. More importantly, it can bring you one step closer to growing your family with confidence.

Learn More About Surrogacy and Your Taxes