Q: I am a surrogate and declared my payment as taxable income on my taxes, can I deduct my fertility treatments and travel? –Mandy R.
A: Hi Mandy, thanks for the question and let’s jump right in and look at how you can deduct your expenses.
Ok, now that you have a lot of extra taxable income the best thing to do is find expenses that reduce the amount of income you must report.
You will need to print out a Schedule C
Take the form and look over all the income and expenses that you could have accumulated during the process. On line 1, enter the amount reported on the 1099-MISC that you received or the amount of compensation you received during the journey.
Starting on line 8 thru line 27, you can allocate expenses you incurred for undoing the process. This can include communicating with your IPs via a paid Skype account, telephone expenses related to calling your IPs…. anything that can be attributable to your income.
The question specifically mentions travel and fertility treatments. Travel expenses are typically reported on line 24a. If you had meals associated with the travel, those need to be reported on line 24b. They are only deductible at 50%. For example, if you spend $10 at Chipotle, you only get a $5 deduction. Fertility treatments are deductible as long as they have not been reimbursed by the IPs.
If you have mileage that you did not get reimbursed for, you should calculate the total miles driven on your car and enter them in the auto expense worksheet. Your tax software or tax preparer should be able to input this when you give them the information.
Your goal should be to maximize deductions to the fullest extent possible
Seeking professional tax advice will pay for itself. When selecting the preparer, call at least 3 CPAs. See if they have any experience with surrogacy and how they can help you with identifying expenses. Beware of H&R Block and Jackson Hewitt. They have great CPAs working for them but they also have employees who are not qualified and won’t give you the best advice.
—Edward Brockschmidt, CPA & Co-Founder of SeedTrust Escrow
Every Friday, CPA and Co-Founder of SeedTrust, Edward Brockschimdt, will focus on “financial fitness” by answering the most commonly asked financial and tax questions relating to surrogacy and egg-donation.
If you have a question that you would like answered, please comment or drop us a line at [email protected] and we may answer your question in the upcoming weeks.
For additional answers to tax related questions please see Brock’s profile on JustAnswer.com by clicking here.