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Egg Donation: Should Payment be Taxable Income or Not?
a blog by Suzanne Rico, February 25, 2014
As the business of fertility booms, the IRS wants to be sure it gets its piece of the pie---even when it comes to egg donation. But now a woman who has twice donated her eggs is arguing in a California tax court that the money she received as compensation (about $20,000) should be a tax-exempt payment for “pain and suffering”.
Since there were nearly 17,000 attempts to conceive in 2012 using donated eggs (this according to the Society for Assisted Reproductive Technologies), it’s time this issue was definitively decided, so that women who donate eggs—or men who donate sperm—can correctly calculate their taxes. Questions need answers: Are women who donate eggs “selling” a service or product? Are they “self employed,” which triggers an additional tax of over 15%? Should payment for egg donation be treated as long-term capital gains, which are taxed at a lower rate?
I’m not an accountant, judge or lawyer, but as a woman who underwent seven IVFs to have her children, this issue makes me uncomfortable, perhaps because I can see both sides. Women who donate eggs for money are “hired” to do a job, but not in the traditional sense. My worry is that if the compensation they receive is taxed at too high a rate, some might decide it’s not worth weeks of painful injections and procedures. People with infertility need more options, not less. Dr. Lawrence Werlin, medical director of Coastal Fertility in Orange County, California, agrees.
"Our fertility industry is very fortunate to have the ability for couples to achieve being parents through egg donation," says Werlin. "If not for this treatment their only options would be adoption or to remain child free. The egg donor system allows the Intended Parent (IP) to have a genetic link to the child through sperm injection (ICSI) of the donor eggs, and allows the Intended mother to carry the child. The egg donors are generous with their time and efforts, but penalizing them with heavy taxes would definitely affect the industry. Understanding that all income is taxable, a possible lower tax or credit for this type income should be taken into consideration for these egg donors."
Egg donation is already an emotionally loaded decision—and worrying about how to report the income to the IRS is a additional burden anyone considering this does not need. The California case is likely to be precedent setting, hopefully clearing up the mishmash of misunderstanding on the issue and setting firm guidelines for the future.