Starting a family is expensive. But don’t leave money on the table! Most people don’t realize there are fertility and pregnancy expenses that are tax deductible.

 

By Halle Tecco, MBA, MPH

Starting a family is expensive, but don’t leave money on the table! Many people don’t realize there are fertility and pregnancy expenses that are tax deductible. Let’s go through what you need to know. 

Starting a family is expensive, but don’t leave money on the table!

First off, what is a tax deduction?

A tax deduction, or a tax write-off, is an expense you can subtract from your taxable income, lowering the amount of taxes you owe. The IRS allows you to deduct certain expenses (like medical bills) to ensure you don’t pay taxes on income you’ve already spent, invested, or lost. A tax credit, on the other hand, goes towards reducing the amount of taxes you owe.

Can you write off fertility treatments on taxes?

Yes! According to accountant Owen Rogers, you can deduct any of the below, unreimbursed medical expenses that exceed (in combination with other qualified medical expenses) 7.5% of your adjusted gross income (AGI) on your personal tax return.

What fertility expenses are deductible?

According to Rogers, “fertility enhancement, such as in vitro fertilization (including temporary storage of eggs or sperm) and surgery to reverse prior surgery that prevented the person from having children, is tax deductible.”

Fertility enhancement, such as in vitro fertilization (including temporary storage of eggs or sperm), is tax deductible.

Here are some fertility-related medical expenses that may be tax deductible:

    • Fertility treatments, including IUI, IVF, embryo/egg/sperm storage, lab fees, and any other procedures required due to infertility
    • Any medications related to infertility
    • Birth control (ironically, most of us start our IVF cycles on birth control!)
    • Pregnancy tests can add up; don’t forget to include the cost in your deductions
    • Acupuncture is considered a qualified medical expense
    • Health insurance premiums you paid for policies that cover medical care (and if you're self-employed and have a net profit for the year, you may be eligible for the self-employed health insurance deduction)
    • Infertility conferences! According to the IRS, you can deduct amounts paid for admission and transportation to a medical conference if the medical conference concerns the chronic illness of yourself, your spouse, or your dependent
    • Therapy. Visits to psychologists and psychiatrists are deductible. It’s unclear if unlicensed counselors or therapists are included, so check with a tax professional on this one.
    • Supplements: You can include the cost of supplements and vitamins if they are recommended by a medical provider as treatment for a specific medical condition diagnosed by a doctor.
    • Surgery to reverse a vasectomy

Congress can add or remove deductions and credits annually, so it’s important to confirm the eligibility of any items listed below before filing your taxes. 

What pregnancy expenses are deductible?

Pregnancies (and delivery) are expensive! If you are pregnant, medical expenses are more likely to meet 7.5% of your income, meaning you would have a significant amount to deduct on your income taxes. Remember, you must pay for these costs out of your own pocket. If your insurance plan covers an expense, you can‘t deduct it. If your insurance plan covers some of the expense, you can deduct the amount you personally had to pay.

Let’s look at some of these expenses that are qualified:

  • Doctors visits, lab work, and other medical tests
  • Labor and delivery costs, whether that’s in a hospital or birth center
  • Breastfeeding supplies, including the cost of breast pumps and supplies that assist lactation
  • Health insurance premiums you paid for policies that cover medical care (and if you're self-employed and have a net profit for the year, you may be eligible for the self-employed health insurance deduction)
  • Classes on childbirth, newborn care, and breastfeeding conducted at or by a hospital
  • Pregnancy test kit
  • Birth control pills. Must be prescribed by a doctor.
  • Breast pumps and supplies. Lactation assistance—does not include excess bottles for storage.
  • Hospital services. The cost of inpatient care at a hospital or similar institution, including meals and lodging
  • Laboratory fees
  • Medical information plan. Amounts paid to a plan that keeps medical info in a data bank

To qualify for pregnancy-related tax deductions you will need to keep accurate records and receipts of your health related expenses such as receipts from your doctor visits, necessary medical equipment, hospital visits, and medication.

Tax-deductible pregnancy expenses by trimester

Rogers spelled out tax deductible pregnancy expenses for us by trimester:

  • First trimester medical expenses: general physical examination, blood tests, urine analysis, etc.: these expenses can be deducted because they are considered preventative for physical defect or illness for the parent and the baby.
  • Second trimester medical expenses: ultrasound, serum screening, amniocentesis, etc.: these are also deductible, as they are considered to be preventative.
  • Third trimester medical expenses and labor: see hospital services above, also any medications given or surgery.

Which expenses are not deductible?

  • Maternity clothes
  • Supplements taken to maintain your ordinary good health and aren't for medical care 
  • Diapers: You can't include in medical expenses the amount you pay for diapers or diaper services, unless they are needed to relieve the effects of a particular disease
  • Prescriptions from overseas: You can't include in your medical expenses the cost of a prescribed drug brought in (or ordered and shipped) from another country. You can only include the cost of a drug that was imported legally
  • Novelty 3D ultrasounds that were not prescribed by your doctor
  • Childcare if you aren’t working. Unfortunately the IRS only allows you to deduct the cost of childcare if you are working or searching for work. An exception to this rule may be available if your doctor orders you to hire childcare due to a medical issue or recover.

The adoption tax-credit

Building your family through adoption means you are eligible for both a tax credit for qualified adoption expenses and an exclusion from income for employer-provided adoption assistance. The credit is nonrefundable, which means it's limited to your tax liability for the year. However, any credit in excess of your tax liability may be carried forward for up to five years. The maximum amount for 2020 is $14,300 per child and goes up to $14,400 for 2021. 

A domestic adoption includes qualified adoption expenses paid before the year the adoption becomes final and are allowable as a credit for the tax year following the year of payment (even if the adoption is never finalized and even if an eligible child was never identified). For an international adoption, on the other hand, qualified adoption expenses paid before and during the year are allowable as a credit for the year when the adoption becomes final.

Getting tax credits for the cost of childcare

Regardless of your income, you may be able to get the Child And Dependent Care Credit if you paid for childcare (daycare, school, nanny) while you work, or look for work. This is a credit, not a deduction, meaning it gives you back a portion of the money you spend on care by reducing the amount of taxes you owe. Some things to consider:

  • The child must be under 13 and claimed as a dependent on your tax return
  • The care could be provided in the household or outside the household
  • You’ll be required to report the name, address, and TIN (either the social security number or the employer identification number) of the care provider on your return

Itemized deduction vs. standard deduction

There are two ways you can make deductions on your income tax return: you can itemize deductions or use the standard deduction. The standard deduction lowers your income by one fixed amount, based on your filing status, age, and other criteria. Itemized deductions are made up of a list of eligible expenses, like those we listed above. You can use whichever one lowers your tax bill the most.

The vast majority (about nine out of 10 of taxpayers) claim the standard deduction. This is because it eliminates the need to itemize every expense, and save every receipt. In 2021 the standard deduction is $12,550 for singles filers and married filing separately, $25,100 for joint filers, and $18,800 for head of household. Use this IRS tool to figure out your standard deduction.

If you had particularly large out-of-pocket medical expenses, you may choose to itemize your deductions. This is the route to go if your itemized deductions are greater than your standard deductions, or if you don’t qualify for the standard deduction.

To claim the medical expense deduction, you must itemize your deductions. Itemizing requires that you don't take the standard deduction. Normally, you should only claim the medical expenses deduction if your itemized deductions are greater than your standard deduction (TurboTax can also do this calculation for you).

What do you need to make an itemized deduction claim?

To qualify for fertility and pregnancy-related tax deductions, make sure you keep clear and accurate records. Save every receipt from purchases, medical visits, tests, and labs. You should keep these documents for at least three years after the tax-filing deadline.

You then must use IRS Form 1040 to file your taxes and itemize your deductions on Schedule A. Remember, your unreimbursed medical expenses must exceed 7.5% of your adjusted gross income (AGI).

  • Keep track of your medical expenses for the current year.

  • The most common way to deduct medical expenses is via Schedule A on your personal return (form 1040). This is only beneficial if you itemize your deductions, however. If you take the standard deduction, you will not receive the benefit from deducting medical expenses.

  • Another way to receive a deduction for medical expenses is by paying them with tax- free Health Savings Account (HSA) funds (contributions to these funds are tax- deductible). HSA’s require a high deductible health insurance plan, though.

Can I submit medical expenses from previous years?

No, only expenses paid in the current year are deductible.

This article has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax or accounting advice. Taxes are very nuanced. You should consult your own tax or accounting advisors before engaging in any transaction.