Important: This article is for general information only. It is not a substitute for advice from an accountant or attorney. Surrogacy laws and tax rules are complicated and can change, so always seek guidance from a qualified professional who knows your situation and your state’s regulations.
Starting your family through surrogacy comes with many financial questions. One area that causes a lot of confusion is how Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and taxes apply to surrogacy expenses. Many intended parents want to know if they can use their HSA or FSA to cover costs, and whether any part of their surrogacy expenses can be deducted on their taxes.
The rules aren’t always straightforward, and there are strict federal limits. This overview will help you understand what’s possible, but it’s essential to remember that this is not professional financial or legal advice. Consult an accountant or attorney before making any decisions about your situation.
What Is an HSA and how does it work?
A Health Savings Account (HSA) lets you set aside pre-tax money to pay for certain medical expenses if you’re covered by a high-deductible health plan. The money you contribute is tax-deductible, it grows tax-free, and you pay no taxes on withdrawals for qualified medical expenses. Flexible Spending Accounts (FSAs) work in a similar way, though they usually have a “use it or lose it” rule by the end of each year.
For intended parents, HSAs and FSAs can be valuable for paying eligible fertility treatment costs. However, not all surrogacy expenses qualify under current IRS guidelines. Before using these accounts, speak with a tax professional who understands assisted reproduction.
Are surrogacy expenses HSA or FSA eligible?
The IRS only allows HSA or FSA funds to be used for the medical care of the account holder, their spouse, or their tax dependents. This means that the medical expenses must be for you, your spouse, or your legal dependent—not your gestational carrier.
Expenses that may qualify for HSA or FSA reimbursement:
- Medical procedures performed on the intended parent, like egg or sperm retrieval
- IVF procedures when the intended parent is the patient
- Fertility medications and diagnostic testing for the intended parent
Expenses that do NOT qualify:
- Any medical care for the gestational carrier, such as prenatal visits and delivery
- Compensation or payments to the gestational carrier
- Agency fees and legal fees
- Travel, lodging, or related costs for the gestational carrier
Bottom line: If the service or procedure is performed on your gestational carrier, you cannot pay for it using your HSA or FSA, because she is not your spouse or tax-dependent.
If you have questions about a particular expense, check with your tax advisor.
Are surrogacy expenses tax deductible?
The IRS uses the same definition for tax-deductible medical expenses as it does for HSA/FSA eligibility. Only unreimbursed medical costs for yourself, your spouse, or your dependent can be deducted, and only if your total qualifying medical expenses exceed 7.5% of your adjusted gross income and you itemize your deductions.
The IRS and U.S. Tax Court have repeatedly decided that the costs for your gestational carrier—including her medical expenses, compensation, and related agency fees—are not deductible. Court cases like Morrissey v. United States (2017) and Private Letter Ruling 202505002 (2025) have upheld this view. Some intended parents have asked the IRS for Private Letter Rulings, but these are case-specific and do not set precedent for everyone.
Only the expenses for medical care performed directly on the intended parent (such as sperm retrieval, egg retrieval, or your portion of an IVF cycle) may qualify for a deduction. A knowledgeable accountant can help you determine what’s possible for your individual situation.
Important tips for intended parents
- Talk to a qualified accountant or attorney. A professional familiar with assisted reproduction can help you plan and answer questions specific to your situation and state laws.
- Keep detailed records. Save all receipts, invoices, and insurance statements. Ask your clinic for itemized bills showing which services were for you or your spouse.
- Plan for out-of-pocket costs. Most surrogacy costs are not HSA/FSA-eligible or tax-deductible, so budget accordingly and review your financial plan before starting.
Possible changes in the future
Surrogacy gives many families the chance to grow, but understanding the financial rules can be challenging. Under current law, most expenses for your gestational carrier and related services are not HSA/FSA-eligible and cannot be deducted on your taxes. Only the costs of medical procedures performed on you or your spouse typically qualify.
There are ongoing efforts to update federal tax law so more surrogacy costs could qualify for HSA/FSA use or be tax-deductible. Nothing has changed yet, but intended parents should follow advocacy organizations and legislative updates in case new laws are passed in the future.
Moving forward in your surrogacy journey
Shining Light Baby is here to support you every step of the way. If you have questions about the surrogacy process, finances, or need referrals to experienced professionals, reach out to us for a personalized consultation.
Ready to move forward with expert guidance and caring support? Contact Shining Light Baby for resources and answers to help you on your path to parenthood.