Deducting Fertility Treatments: The Morrissey Case, Part I

The US tax code addresses the question of whether deducting fertility treatments is allowable. 26 U.S. Code § 213 provides a tax deduction for any medical and dental expenses that a taxpayer incurs during the year that are not compensated for by insurance or otherwise – this includes “the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” This itemized deduction is currently limited to the amount that exceeds 7.5% of your adjusted gross income (AGI) for the year. (We’ve written about including these sorts of deductions in your personal tax planning previously.)

Fertility treatments: A costly endeavor

At an average cost of roughly $12,000, deducting even a small portion of your fertility treatments as a medical expense can make a significant difference on your annual tax return. Fertility treatments are acknowledged to be medical treatments that “affect the function of the body” under Section 213, and taxpayers may therefore take a medical expense deduction for the cost of diagnostic tests, pregnancy tests, fertility drugs, artificial insemination, in vitro fertilization (IVF), temporary storage of eggs or sperm, reproductive surgery, vasectomy or tubal reversal, as well as travel expenses required to obtain fertility assistance.

Over a four year period, Joseph Morrissey spent more than $100,000 for such treatments, and took the matter to court when the IRS refused him the deduction.

The Morrissey case

In 2010, Joseph Morrissey and his longtime (same-sex) partner decided to create a family by conceiving children through IVF with Morrissey as the biological father. Their plan was to use Morrissey’s sperm to fertilize eggs donated by one woman, and to implant the resulting embryos into the uterus of another woman who would serve as their gestational surrogate. The process was not without difficulties, and over the next four years, the couple spent more than $100,000 on three egg donors, three surrogates, seven IVF treatments and two fertility specialists.

On his 2011 tax return, Morrissey tried to include the $57,000 he had spent that year on fertility treatments, which would have entitled him to deduct $36,538 (the amount that exceeded 7.5% of his AGI that year). This would have provided him with a tax refund of $9,539.

The IRS denied the refund. Morrissey appealed to the IRS Office of Appeals claiming discrimination and lost. He then filed a refund suit in U.S. District Court, which granted summary judgment for the IRS. Morrissey appealed again, this time to the U.S. Court of Appeals for the 11th Circuit, and that court rejected both his tax and equal protection arguments.

In our next post, we will explain Morrissey’s arguments and the Court’s ruling.