Expense Deduction - Surrogate
The tax system recognizes the importance and economic sense of adoption, but expenses for a surrogate mother are not an allowable deduction.
Expense Deduction - Surrogate
Many times, it is clear that tax deductions are intended to serve a social good. The idea of adoption is an example. When children are adopted, especially out of the foster care system, society as a whole benefits. Not only does the child find a home, but society is freed from the welfare cost of providing care. It is therefore logical that adoption expenses are a valid deduction.
A tax credit up to $10,390 is allowed for any reasonable expense related to the adoption of a qualified child. This includes court costs, attorney fees, and travel expenses. This deduction is still allowable even in cases where the adoption does not actually take place due to some problem that is not your own decision.
In recent years due to the possibility of such things as “in vitro” fertilization and egg and sperm donors, the use of a surrogate mother has become an option. The surrogate mother is one that actually carries the child during the pregnancy. The surrogate mother does this for pay and turns the child over to the “biological” parents after birth. The adoption tax credit does not apply to expenses related to the use of a surrogate mother.
This can lead to some confusion because, in the case of adoption, expenses relating to the care of the birth mother are part of the $10,390 credit. The difference is that there is no biological relationship between the birth mother and the potential adopting parents. In the case of a surrogate, there is a biological relationship between the child and at least one of the target parents.
The adoption tax credit does not apply when you are adopting the child of your spouse. This situation occurs when a step-parent is adopting their stepchild. Some States, such as Utah, allow the adoption tax credit on State tax returns, but they also do not recognize surrogate mother expenses. It is possible that some of the expenses involved in a surrogate arrangement might be considered medical expenses. In this case, they will be subject to the 7.5% of adjusted gross income like any other medical expense. There is no way, however, that any payments to a surrogate mother will be considered a medical expense.