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Fertility Treatment Tax Deductions
March 14, 2013
Fertility treatments carry a hefty price tag and few people realize some costs associated with fertility treatment are tax deductible. Diagnostic tests, fertility drugs, reproductive surgeries, in vitro fertilization (IVF), intrauterine insemination (IUI), travel expenses associated with fertility treatment, and pregnancy tests are all deductible expenses.
Understanding The Medical Expense Threshold
It might be a smart decision to enlist the help of a tax accountant. Otherwise, consult the current IRS guidelines to be sure you thoroughly understand the allowable deductions.
Joan Lyneis, a New Jersey accountant, advises that while there is not a formal income cap for filing medical tax deductions, there is a threshold that must be met in order to claim medical expenses. “In 2012, expenses that exceed 7.5% of your AGI (Adjusted Gross Income) may be deducted; 10% if you are subject to Alternative Minimum Tax. For example, if your AGI for 2012 is $90,000 and your total medical expenses were $12,500 then $5,750 would be your deduction (7.5% of $90,000. = $6,750. $12,500 less $6,750 =$5,750). As per the Affordable Care Act in calendar year 2013 the AGI threshold will increase from 7.5% to 10% for those under the age of 65 thus making it more difficult to qualify for the deduction,” she explains. If your total medical expenses amount to less than 7.5% of your AGI, you cannot deduct them.
Which Fertility Treatments are Tax Deductible?
Before you begin gathering receipts and totaling your medical expenses for 2012, you should have a good idea of what is deductible and what is not. You can deduct medical expenses endured by yourself and your spouse. Some of the deductions most applicable to a fertility patient include:
- Birth control pills or fertility drugs that are not imported from other countries.
- Diagnostic services.
- Fertility enhancement expenses for overcoming the inability to have children (including IVF, temporary storage of eggs or sperm, reproductive surgery, vasectomy reversal, or tubal reversal).
- Insurance premiums for policies that cover surgical services, x-rays, and prescription drugs.
- Laboratory fees that are a part of your medical care.
- Lodging expenses incurred while traveling for medical care (Lodging not to exceed $50 per night per person, does not include recreational expenses).
- Pregnancy test kits.
- Transportation expenses incurred while traveling for medical care (including: bus, train, taxi, airplane fares, or ambulance services.
- Cost of mileage, gas, parking fees, and tolls associated with traveling for medical care.
“It is very important to keep itemized receipts for the fertility related and other medical expenses. As it relates to travel to and from doctor visits and other fertility based appointments, it is important that you keep a log of the date of the service, the miles traveled and the purpose of the visit. Doctors and/or clinics are often willing to provide an itemized ledger of your payments made throughout the year for these expenses. It is also very convenient that, should you use the same pharmacy, to ask for a printout of your total expenses for the year as many pharmacies can provide that information very easily. The receipts support the deduction and it is important that they be saved,” Lyneis states.
Another important consideration is to be sure that you are filling out the appropriate tax deduction form for your specific case. Ms. Lyneis advises a taxpayer to determine which form best suits their income and medical expenses: a Schedule A or state income tax form. “Schedule A may not be the most effective filing for all taxpayers and even though some may not qualify to use this option, medical deductions may be able to be used on the state income filing with less restrictive income thresholds.” You should consult the IRS guidelines to determine which form is best suited for your income level and deductions. Keep in mind that changes to your income level during the year may impact which form you are required to fill out.
Flexible Spending Where Tax Deductions Don't Apply
For fertility patients who do not anticipate meeting the medical deduction threshold, they might plan to use Flexible Spending Accounts through their employer. Marymichele Delaney, Associate Director and Benefits Manager at Wellesley College in Massachusetts, says it makes sense to consider all of your options at the start of the year and plan accordingly. “Fertility patients should make sure to include anything they can to meet the threshold for medical deductions then consider using Flexible Spending if they don’t think they will meet the minimum required. The threshold is 7.5% of your Adjusted Gross Income and most people aren’t going to get there. You can put aside $2,500 pre-taxed and each member of the couple can do that if their employer offers Flexible Spending. That gives you $5,000 to use toward fertility treatment,” she advises. Flexible Spending is not a retroactive benefit, so fertility patients should consider their expenses at the beginning of the year and plan ahead.