Infertility Treatments and your TaxesJanuary 2, 2013Carole No Comments »
It’s that time of year again. If you are employed, your employer must send you your W2 forms by the last day of January and by April 15, 2013 you must file your annual federal and state tax returns. Most infertility patients still do not have full insurance coverage for their treatments and find that they have accumulated thousands of dollars in expenses. Can you deduct these expenses? Maybe.
Resolve of New England published an article called “4 Steps to understanding Tax Deductible Fertility Treatment Expenses” which has some practical tips for identifying tax deductions related to medical expenses associated with infertility.
Determine if you have ENOUGH expenses to deduct. Crazy as it sounds, you have to spend more than 7.5% of your adjusted gross income BEFORE you can deduct any medical expenses. You will need to collect your statements and receipts and add up all your eligible expenses. Publications 502 from the IRS list various kinds of eligible deductions:
Both of these documents were prepared for use in filling out 2011 forms, so there may be some changes for 2012 returns but they do provide a good overall idea of what type of expenses can be included. Specifically, fertility treatments are described here:
You can include in medical expenses the cost of the following procedures to overcome an inability to have children.
- Procedures such as in vitro fertilization (including temporary storage of eggs or sperm).
- Surgery, including an operation to reverse prior surgery that prevented the person operated on from having children.”
Remember to include all your non-infertility medical expenses towards your total for the year. If you don’t have your receipts, your health care providers can usually pull up your account and print off a list of all your payments to them, if necessary.
The second part of determining whether you have enough in expenses is to determine what your adjusted gross income was for 2012. Your adjusted gross income (AGI) is reported on your 1040 form and is the difference between total income from taxable sources and your deductions. If you have accumulated more than 7.5% of your AGI in eligible medical expenses, you have some deductible expenses. For instance, if your adjusted gross income is $100,000, you need to have over $7,500 in medical expenses to deduct a portion of these expenses. Only expenses in excess of the $7500 limit are deductible. For instance, if you had $8,000 in expenses, you can deduct $500 (total expenses minus $7500) from your taxes. If you had $15,000 in expenses, you can deduct $7,500. To take advantage of these deductions, you will have to submit an itemized tax return.
Resolve worked with lawmakers to introduce a bill ( The Family Act) which would make up to 50% of infertility treatment expenses tax deductible. The legislation is based on the adoption tax credit that already exists.With the last minute Fiscal Cliff wrangling, it is unclear at this time what happened with this bill. I wrote about the Family Act in a previous post.
Regarding a related bill, on December 28, 2012, the Senate approved the “Women Veterans and Other Health Care Improvements Act of 2012’’ bill, which provides access to ART services for veterans (and their partners) who suffered reproductive system damage during their military service. This bill also reimburses veterans for the expenses associated with three adoptions-as long as it does not exceed the cost of one cycle of IVF. Considering that adoptions can easily cost twice to three times what an uncomplicated IVF cycle costs, the offer of three adoption cycles is likely not to be realized. Two other caveats on this bill. Approval by the House of Representatives is still pending (as of Dec. 28) and the bill will likely not go into effect, even if passed by both houses, before 2014 since the Department of Veteran’s affairs has 18 months to implement the program.
Some infertility patients are lucky enough to have family members who are able to help them pay for some of the treatments. Family members who provide this assistance may be able to do so without having to incur gift or estate tax penalties under some medical or educational situations, called Ed/Med exclusions. This article by attorney Jennifer D. Taddeo , originally published as a guest blog post at Fertility Within Reach, provides some helpful insights, some of which is copied below.
“Under Section 2503(e) of the Internal Revenue Code, people may pay for certain educational and medical expenses of others without incurring any gift tax or using any of the $13,000 annual exclusion. This exception to the gift tax is frequently referred to as the “ed/med” exclusion. Parents who are concerned about estate and gift taxation may use this exclusion to transfer value to their children above and beyond their annual exclusion gifts.
Gifts made under this exclusion must 1. be for the education or training of an individual or for medical care of an individual and 2. be paid directly to the educational institution or the person who provides the medical care.
First, the expenses must qualify as expenses for “medical care” as defined in I.R.C. Sec. 213(d). This is defined as care “for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” It has been long settled that procedures to facilitate or prevent pregnancy qualify as medical care, so basic infertility treatments will qualify as medical care.”
Interestingly, some of the expenses that are incurred when using donor eggs can also be considered deductible expenses, such as the donor fee, agency fee, the donor’s medical expenses and insurance for post-procedure medical expenses and legal fees for the donor contract. Expenses associated with surrogacy are not as clear cut as to whether they would also be considered medical expenses. Read the complete article for more information.
I hope these resources give you a starting point for finding ways to save some money on your 2012 tax bill. However, as I am NOT a tax professional, please be sure to consult with a tax accountant for professional advice before filing your taxes.
Happy New Year!
© 2013, Carole. All rights reserved.