In-vitro fertilization treatments can add up quickly (according to a 2014 study published in the Journal of Urology05330-5/abstract), the median out-of-pocket expenses for couples undergoing IVF was $19,234), but there's a silver lining: You may be able to deduct the cost of the procedure from your federal taxes. However, there are a few simple rules you need to know first.
Think about medical necessity, says Ramona Ortega, founder and CEO of financial platform Mi Dinero Mi Futuro. "Does it meaningfully promote the function of the body or treat illness or disease?" In this case, the IRS says yes. Fertility enhancements are deductible because they help you "overcome an inability to have children" (other elective procedures, such as Botox, are not, because they're seen as simply enhancing your looks or body but are not deemed medically necessary). It also means that if you paid for your spouse's IVF or for a dependent (say, a child or sibling who meets the IRS qualifications) to have the procedure, you might be able to write those off as well. For example, your sister's IVF might qualify if you paid for it and you also pay for more than half of her support.
In practical terms, what does this actually mean for you? According to Ortega, you can deduct the cost of the bills from the fertility doctor, any equipment or supplies, or diagnostic devices you're given, co-pays you made to the insurance company, lab fees, and prescription meds.
You can even include the cost of traveling to and from the treatment centers (that includes parking fees, tolls, bus, taxi, train, plane, and ambulance fares, and gas and car expenses). The IRS official website notes that you can either use your actual expenses or the standard medical mileage rate (in 2016, it was 19 cents per mile). Basically, if you kept meticulous records of your travel expenses, you might want to use your actual expenses, but if you didn't track every time you stopped for gas, don't panic -- it's OK to use the standard medical mileage and just tack your tolls and parking fees on at the end. (You can also calculate both and see which gives you the greater deduction.)
You can also include lodging related to medical procedures, though you can only deduct $50 per person per night. Example: If you and your spouse stay overnight at a hotel on your way to the treatment center, you can include $100 per night as a medical expense; however, you cannot include food and there can be no significant mixing of business and pleasure.
One important caveat: Ortega says that you can't deduct any expenses you paid for via a flexible spending account or a health savings account, because they're paid for with tax-free money. You also can't deduct health insurance premiums that are paid for through your employer. But otherwise, you can include any IVF-related expenses you paid for throughout the tax year (even if you paid with a credit card), regardless of when the actual procedure or treatment took place.
Taking the write-off
Keep every IVF-related receipt and invoice you receive (make sure it's dated, has the amount you paid, and has your name and address on it), even if you're not sure if you can include it as a medical expense later on. You might also want to keep a journal or record of all your expenses for seven years, in case the IRS ever decides to come knocking.
When you start work on your taxes, total the bills up. Subtract any reimbursement you received, whether from your insurer, a workplace program, treatment center or clinic, or any other source. Next, calculate your adjusted gross income (AGI). Ortega says you can deduct on Schedule A (form 1040) any amount that exceeds 10 percent of your AGI.
If your head is spinning, think of it this way: Say you made $40,000 last year. 10 percent of that is $4,000. If you spent $2,500 on medical expenses, you cannot take the deduction. But if you spent $9,000, than you could deduct $5,000. "In essence, the IRS expects you to absorb 10 percent of the cost and will give you a tax break on anything above the 10 percent," Ortega says.
It's important to note that from January of 2013 until December 31, 2016, there was a temporary exemption for seniors that allowed anyone born before 1952 to deduct medical expenses above 7.5 percent of their income. However, it was a temporary exemption and beginning this January, the threshold changed. If you or your spouse turned 65 during 2016, you can deduct unreimbursed medical expenses that exceed 7.5 percent of your income when you do your taxes this year, but starting with 2017's tax year, the 10 percent rule will apply to everyone.
Ortega also stresses that claiming the medical expenses deduction requires you to itemize, so you can't use the standard deduction. "Make sure that it makes sense for you to take this deduction instead of the standardized one," she says.
Tax laws are complicated and can change at any time, so it's important to make sure you have the most up-to-date information possible before you start on your taxes. When in doubt, make sure you have itemized receipts and invoices, and double- and triple-check the IRS' official list of medical expenses that you can include on your taxes. You may find that you can write off more than you thought you could.