In PLR202114001[1] the IRS ruled that most of the costs incurred by a male couple wishing to have a child were not deductible medical expenses.

The question involves IRC §213 which allows a deduction for medical care of the taxpayer and dependents of the taxpayer. Specifically, the ruling looks at the definition of such care found at IRC §213(d)(1)(A) which reads:

(d) Definitions

For purposes of this section—

(1) The term “medical care” means amounts paid—

(A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,…

The taxpayers were seeking a ruling allowing a deduction for costs incurred related to the following items:

Medical expenses directly attributed to both spouses
Egg retrieval
Medical expenses of sperm donation
Sperm freezing
IVF medical costs
Childbirth expenses for the surrogate
Surrogate medical insurance related to the pregnancy
Legal and agency fees for the surrogacy
Any other medical expenses arising from the surrogacy.[2]

The ruling begins by noting that “vasectomies and operations that render a woman incapable of having children affect a structure or function of the body” and thus are medical expenses under the definition found at IRC §213(d)(1)(A).[3] However, note that it is the impact on the body of the taxpayer, not the ultimate impact on having a child that renders this as a medical cost.

As the PLR notes:

The medical expense deduction has historically been construed narrowly. See Atkinson v. Commissioner, 44 T.C. 39 (1965); See also Magdalin v. Commissioner, T.C. Memo 2008-293, aff'd without published opinion, 105 A.F.T.R.2d (RIA) 2010–442 (1st Cir. 2009). Deductions for medical care have been confined strictly to expenses incurred primarily for the prevention or alleviation of a physical or mental defect or illness. See Treas. Reg. § 1.213-1(e)(1)(ii). Generally, for an expense to be deductible, there must be a causal relationship between a medical condition and the expenditures incurred in treating the condition. See Jacobs v. Commissioner, 62 T.C. 813 (1974); Havey v. Commissioner, 12 T.C. 409 (1949). The current facts do not identify a medical condition nor do taxpayers allege that expenses are incurred to treat a medical condition. Rather the request relies on the second portion of I.R.C § 213(d)(1)(A) in claiming IVF, surrogacy, and related costs are for the purpose of affecting any structure or function of the body.[4]

The PLR looks first to the 2008 Tax Court decision in Magdalin v. Commissioner, TC Memo 2008-293:

The Tax Court considered surrogacy and egg donor expenses claimed by a single, heterosexual male, and held costs incurred in fathering children through unrelated egg donors and gestational carriers are not deductible medical expenses under I.R.C. § 213. See Magdalin v. Commissioner, T.C. Memo 2008-293, aff’d without published opinion, 105 A.F.T.R.2d (RIA) 2010–442 (1st Cir.2009). The taxpayer in Magdalin obtained donated eggs to be fertilized with his sperm and transferred to a gestational carrier using the IVF process. He deducted legal fees related to the donor and surrogacy agreements, fees and expenses of the donor and surrogate, fees to the IVF clinic, and prescription costs. The Tax Court disallowed these costs as medical expense deductions holding there was no causal relationship between an underlying medical condition or defect and the taxpayer’s expenses, nor were the costs incurred for the purpose of affecting a structure or function of taxpayer’s body. Id.[5]

The key issue is that while these various costs are incurred to affect a human body, it’s not the body of a party for whom these taxpayers are allowed to deduct medical expenses. The ruling points this out as follows:

Only costs and fees directly attributable to medical care for diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body of the taxpayer, the taxpayer’s spouse, or taxpayer’s dependent qualify as eligible medical expenses. Expenses involving egg donation, IVF procedures, and gestational surrogacy incurred for third parties are not incurred for treatment of disease nor are they for the purpose of affecting any structure or function of taxpayers’ bodies. As such, payments related to the following products and services are not deductible under I.R.C. § 213: egg retrieval, IVF medical costs, childbirth costs and fees for the surrogate, surrogate medical insurance related to the pregnancy, legal and agency fees for the surrogacy, and other medical costs and fees arising from the surrogacy.[6]

However, the ruling did find some expenses would qualify because they directly affected the taxpayers in question:

In contrast, however, there are a comparatively smaller number of medical costs or fees paid for medical care directly attributable to taxpayers, examples in this case being sperm donation and sperm freezing, that are deductible medical expenses under I.R.C. § 213, subject to the adjusted gross income limitation of the section.[7]

[1] PLR 202114001, April 9, 2021, https://www.taxnotes.com/research/federal/irs-private-rulings/letter-rulings-%26-technical-advice/same-sex-couple-can%e2%80%99t-deduct-most-costs-of-having-a-child/4m2b5 (retrieved April 15, 2021)

[2] PLR 202114001, April 9, 2021

[3] Rev. Rul. 73-201 and Rev. Rul. 73-603

[4] PLR 202114001, April 9, 2021

[5] PLR 202114001, April 9, 2021

[6] PLR 202114001, April 9, 2021

[7] PLR 202114001, April 9, 2021