Two recent decisions from the Tax Court of Canada provided some clarity about which medical expenses are eligible in the context of surrogacy.
In one case a gay male claimed a medical expense tax credit for expenses totalling $80,808. Nearly 80% of that amount was disallowed because it represented payment to the surrogate mother and medical expenses incurred by the surrogate. Under Canadian tax law the credit only applies for expenses incurred in respect of the patient (and it was found the surrogate is not the patient – only the taxpayer, his spouse and dependants qualify as “patients”). However, $16,675 for IVF was allowed, which is logical because IVF is included in the list of eligible medical expenses.
The man also argued that gay male couples are discriminated against by Canada’s tax laws, and that the tax law infringed upon his right to equality under the Canadian Charter of Rights and Freedoms. He argued that “because gay male couples do not have ovaries to produce eggs and wombs in which to gestate a foetus, they must work with surrogates, which heterosexual and female gay couples do not have to do.” The Court decided that the law does not infringe on his Charter rights because surrogacy fees are not eligible for the medical expense tax credit for anyone – gay or straight. Many straight couples with fertility issues must also use an egg donor, surrogate, or both, to create their families. The man’s appeal from the tax reassessment was therefore dismissed.
In the second case the individual claimed a medical expense tax credit of $29,220. Most of the expenses were paid to an organization in India for a procedure to implant a surrogate with an embryo fertilized with his own sperm. The individual also claimed costs of $1364.48 for travel to India and $408 for meals. Like the case above, none of the expenses that related to the surrogate mother were deductible. However, he was entitled to claim a credit for medical expenses for IVF and embryology services, travel to India and his meals in India.
Interestingly, in a decision several months earlier involving a woman pursuing egg donation abroad, meal expenses were not allowed because equivalent treatments were available in her hometown and travel was therefore not actually required. It was not discussed whether the man who traveled to India in the case above had a local alternative available. Based on these conflicting cases it is unclear whether meals purchased abroad are or are not eligible under the medical expense tax credit.
The bottom line: intended parents should save all receipts relating to assisted reproductive technology and canvass all possible deductions with a qualified accountant.
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