This private letter ruling (PLR 202505002) addresses the deductibility of medical expenses related to in vitro fertilization (IVF) and gestational surrogacy under Internal Revenue Code Section 213.

Facts of the Letter Ruling Request

• The taxpayers are a legally married heterosexual couple residing in State.
• Taxpayer A has been diagnosed with medical conditions that require medication contraindicated in pregnancy.
• Due to Taxpayer A’s condition, the couple will use IVF with Taxpayer B’s sperm and a donated egg and a gestational surrogate to carry the pregnancy.
• The taxpayers requested a ruling on the deductibility of various costs and fees, including:
  • Medical expenses directly attributed to both spouses
  • Egg donor costs
  • Medical expenses of sperm donation
  • Sperm freezing
  • IVF medical costs (embryo creation and storage)
  • Childbirth expenses related to the surrogate
  • Surrogate’s medical insurance
  • Legal and agency fees for the surrogacy
  • Other medical expenses arising from the surrogacy

Taxpayers’ Requested Findings

The taxpayers sought a ruling that would allow them to deduct all the listed expenses related to IVF and surrogacy as medical expenses under Section 213 of the Internal Revenue Code.

IRS’s Analysis of Law and Authorities

• Section 213(a): Allows a deduction for medical care expenses for the taxpayer, their spouse, or dependents, to the extent these expenses exceed 7.5% of the adjusted gross income. These expenses must not be compensated by insurance or otherwise.
• Section 152(a): Defines a dependent as a qualifying child, including a child of the taxpayer.
• Section 213(d)(1)(A): Defines medical care as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. This also includes medical care insurance.
• Case Law: The IRS cites several cases that have denied deductions for reproductive technology expenses, such as IVF and surrogacy, when the taxpayer, spouse, or dependent did not personally use the technologies or have a medical condition requiring them. These cases include:
  • Morrissey v. United States, 871 F.3d 1260 (11th Cir. 2017)
  • Longino v. Commissioner, T.C. Memo. 2013-80, aff’d, 593 Fed. Appx. 965 (11th Cir. 2014)
  • Magdalin v. Commissioner, T.C. Memo. 2008–293, aff’d without published opinion, 2009 WL 5557509 (1st Cir. 2009)
• IRS Rationale: The IRS notes that the expenses in question, such as those related to the egg donor and surrogate, are not for the medical care of the taxpayers, their spouse, or a dependent. The IRS emphasizes that the medical procedures in the case will affect the structure or function of a third party, not the taxpayers. Therefore, these expenses do not meet the requirements for deductibility under Section 213.

IRS’s Ultimate Decisions

• Non-Deductible Expenses: The IRS concluded that the following expenses are not deductible under Section 213:
  • Egg donor costs
  • Egg retrieval
  • Sperm freezing
  • IVF medical costs (embryo creation and storage)
  • Legal and agency fees for the surrogacy
  • Childbirth expenses related to the surrogate pregnancy
  • Surrogate’s medical insurance related to the pregnancy
  • Other medical costs and fees effectuating and arising from the surrogate pregnancy
• Deductible Expenses: The IRS determined that the costs or fees paid for medical care directly attributable to the taxpayers, such as Taxpayer B’s sperm donation, are deductible medical expenses under Section 213, subject to the gross income limitation.

Prepared with the assistance of NotebookLM.

The text of the ruling can be read at https://www.irs.gov/pub/irs-wd/202505002.pdf