If you are considering becoming a gestational surrogate, you may have questions about how to handle your taxes. Most expenses associated with surrogacy are incurred by the intended parents, so you probably won’t have many deductions. The major question to ask is whether or not the compensation you received as a surrogate is taxable income.
The best advice is to always consult a tax attorney familiar with any tax ramifications surrogacy may bring. Your individual tax liability will depend on your own circumstances and the state you live in. But here are some general guidelines.
Ask questions about your contract
It’s better for you from a tax standpoint if the compensation you receive is listed as reimbursement for pain and suffering associated with treatments, pregnancy and delivery. Some contracts list payments to surrogates as “pre-birth child support.” This supposes that you are being compensated for the expenses associated with caring for the IP’s baby before birth. In either case, this compensation is not normally considered taxable income.
Where you can run into a grey area is if the agency or intended parents list the surrogacy as services rendered and issue you an IRS form 1099. If this cannot be avoided, you should request additional compensation to offset the tax impact.
Track all expenses
Intended parents are normally responsible for all expenses associated with surrogacy, but keep track of all expenses, noting any that were not reimbursed and bring them to your tax advisor when the time comes. This could include medical or childcare expenses, clothing and equipment, travel expenses, etc. It’s hard to say what could be deductable. Keep receipts for everything and let your tax consultant tell you what you can and cannot use.
Keep in mind that you must itemize your deductions in order to claim them. The expenses must exceed ten percent of your adjusted gross income. IRS Publication 502 offers additional details on how to deduct expenses.
Your attorney or tax professional can advise you on deductions and liabilities and ensure you are compliant with all state, local and federal tax regulations. If you have any questions about surrogacy, please contact the surrogacy experts at Surrogate Solutions. If we don’t know the answer, we can put you in touch with someone who does.