After the baby is born

Okay, you have a brand new baby, now what?  There are plenty of baby guides out there already, so we'll focus below on issues that are unique to intended parents with surrogate babies born in India.

Bottle feed, or other options?

In terms of feeding a surrogate baby (both immediately after birth, and after bringing the baby home), there are many options.  Not all options are always available, and what is best will vary from baby to baby and intended parent to intended parent.  Nevertheless, the main options include:

  1. Bottle feed.  This is the easiest.  Note that formula doesn't digest as easily as breast milk, so formula babies tend to have more gas pain, resulting in more crying.
  2. Induced Lactation / Adoptive Breastfeeding.  Similar to an adoptive mother, a surrogate mother can induce lactation in order to feed the baby.  A google search on "adoptive breastfeeding" can provide much more information.  Inducing lactation takes time, effort, and often does not generate enough milk to feed the baby.  
  3. Use a wet nurse.  These are not widely available.  They are not available at Hirinandani hospital in Mumbai.   
  4. Ask the gestational carrier to nurse the child.  Rotunda generally does not have/allow babies to breastfeed, however Dr. Patel in Anand does allow (and support) this. 
  5. Ask the gestational carrier to express milk for the child.  If you want to pursue this, it's best to confirm with the gestational carrier before you select her.  If so, you may be able to get several days of colostrum and/or milk while the surrogate is still in the hospital recovering from the pregnancy.
  6. Use milk from a milk bank.  As of this writing Hiranandani does not have a milk bank available.
  7. Find a friend/acquiantance who expresses, freezes excess milk, but is expressing more milk than her child can consume.  Typically, this milk will be thrown out.  Note that many women do not produce extra milk, but some produce more than enough to have extra. 

Adoptive breastfeeding is the most likely alternative.  Two good sources for information on adoptive breastfeeding are http://www.fourfriends.com/abrw/ and http://breast-feeding.adoption.com/.

Flying home with the baby

You'll need to think about how to get the baby home, typically by plane.  Some issues to keep in mind include:

  • Seating: Until the baby is 2 years old, the baby can generally sit in your lap.  You can generally have 1 baby per lap.  If you have triplets, with two adults, you probably need to buy a third seat.  Do confirm with your airline.
  • Baby Food: You'll need to feed the baby.  If you're not breast feeding, you'll have to plan how to handle forumla.  You'll need sterilized bottles, formula and water.  You can pre-sterilize bottles and travel with them in platic bags.  You can pre-measure formula into either plastic bags or carrying containers.  Water is more complicated - check with your airline or airport.  Your choices come down to trying to carry water inside the bottles through security (say it's baby formula water - maybe you'll get through), purchase water after you've cleared security, or get water on the airplaine from the stewardesses.  
  • Changing the baby:  The onboard bathrooms have limited space for changing a baby, but you'll have to make do.  In addition to diapers, remember to carry extra baby wipes. 
  • Change of clothes for the baby: Bring the appropriate number for the flight.
  • Change of clothes for you: In case the baby throws up, goes to the bathroom, or does something else on you. 

Some other tips:

  • Ear Pressure: If the baby is breast feeding or formula feeding, you may consider feeding them during take-off and landing.  This can help alleviate any ear discomfort. 
  • Sick baby: Check with your doctor if the baby has a cold, cough, or ear infection. 

 Each airport seems to handle security differently - double check everything with your airline/airport before leaving.

Surrogacy (Surrogate): Tax Deductions

As a U.S. tax payer, I have the opportunity work through my taxes every year. This year I’m figuring out how much of our surrogacy expenses are deductible. After reading IRS Publication 502 (2009) Medical and Dental Expenses and multiple boards (1 ,2, 3, 4) this is what I’ve learned.
I’ll look at whose expenses can be deducted, how much can be deducted, and what can be deducted.

Throughout this document, italicized text is cut and pasted exactly from IRS Pub 502. For better or for worse, I made an editorial decision to provide more complete text when I’ve referred to publication 502. This does mean that I’ve included some portions of text that are not specifically relevant to surrogacy.

Whose expenses can you deduct?

You can generally include medical expenses you pay for yourself, as well as those you pay for someone who was your spouse or your dependent either when the services were provided or when you paid for them. (Publication 502)

A surrogate mother is, of course, neither the taxpayer nor the taxpayer's spouse, and typically is not a dependent of the taxpayers. Neither is a third party egg donor. Nor is an unborn child. Payments on behalf of any of these parties are not deductible.

However, expenses for the taxpayer, taxpayer’s spouse, or the child (once born), are deductible.

How much can you deduct?

First, you have to be itemizing your deductions in order to take a medical deduction. You’ll need to check whether the total of your itemized deductions is greater than the standard deduction. If so, it makes sense to itemize your deductions. That topic is outside the scope of this post.

There are many other expenses you can itemize and take as a deduction, the most common being mortgage interest.

With regard to medical expenses, you can only deduct medical expenses that exceed 7.5% of your adjusted gross income. So if medical expenses are equivalent to 5% of your adjusted gross income, you cannot deduct any medical expenses.

Which expenses can you deduct?

Payments to the Surrogate.

Prevailing views are that you cannot deduct these, but it hasn't been tested in court.

In cases were infertility is the cause of pursuing surrogacy, some could argue that infertility is a medical condition that requires treatment, and that the payment to the surrogate is part of this treatment.

This is a very grey area, but most tax advisors are not suggesting to deduct these fees. The closest advice seems to come from here:

In your letter of July 17, 2002, you asked whether medical and legal expenses incurred in connection with a surrogate mother and her unborn child are deductible under § 213 of the Internal Revenue Code. Although your request is not for a formal ruling, we are happy to provide you with general information.

Section 213(a) of the Internal Revenue Code allows a taxpayer to deduct the expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, the taxpayer's spouse, or the taxpayer's dependents (as defined in § 152), to the extent the expenses exceed 7.5 percent of adjusted gross income. Section 152(a) defines a dependent as (1) an individual listed in the section (2) for whom the taxpayer provided over half of the support for the taxable year.

A surrogate mother is, of course, neither the taxpayer nor the taxpayer's spouse, and typically is not a dependent of the taxpayers. Nor is an unborn child a dependent.

Cassman v. United States, 31 Fed. Cl. 121 (1994). Thus, medical expenses paid for a surrogate mother and her unborn child would not qualify for deduction under § 213(a).

Under very limited circumstances, legal fees may be allowable as medical care expenses. In Gerstacker v. Commissioner, 414 F.2d 448 (6th Cir. 1969), legal expenses incurred to create a guardianship in order to involuntarily hospitalize a medically ill taxpayer were held to be deductible medical expenses because the medical treatment could not otherwise have occurred. However, legal expenses incurred in connection with a surrogate mother are typically not in connection with otherwise-deductible medical care expenses. Thus, the legal expenses likewise would not be deductible under Section 213(a).

Medical Expenses:

If the sperm and egg donor is either the taxpayer or the taxpayer’s spouse, then any medical expenses for the egg donor and sperm donor are deductible. This would typically include all the IVF-like expenses including doctor visits, lab fees, and medication.

Medicines
You can include in medical expenses amounts you pay for prescribed medicines and drugs. A prescribed drug is one that requires a prescription by a doctor for its use by an individual. You can also include amounts you pay for insulin. Except for insulin, you cannot include in medical expenses amounts you pay for a drug that is not prescribed.

Imported medicines and drugs. If you imported medicines or drugs from other countries, see Medicines and Drugs From Other Countries , under What Expenses Are Not Includible, later.

There is additional language in Publication 502 that specifically references fertility treatment which says:

Fertility Enhancement
You can include in medical expenses the cost of the following procedures to overcome an inability to have children.
• Procedures such as in vitro fertilization (including temporary storage of eggs or sperm).
• Surgery, including an operation to reverse prior surgery that prevented the person operated on from having children.

Airfare/Transportation:

The airfare for egg transfer and sperm donation trip should be deductible for both travellers, as it seems to fall under the language below.

Whether the airfare to pick-up the baby can be deducted is probably open to debate, and whether it is deductible for both parents would be open to further debate. It would seem that it falls under “transportation expenses for a parent who must go with a child who needs medical care”. The language says “a parent”, so for the baby pick-up trip, airfare for one parent should be deductible. Airfare for the second parent may not be deductible.

This does not seem to have been tested in a court.  You may read the language below and make your own call.  The language in Publication 502 says:

Trips
You can include in medical expenses amounts you pay for transportation to another city if the trip is primarily for, and essential to, receiving medical services. You may be able to include up to $50 per night for lodging. See Lodging , earlier.

You cannot include in medical expenses a trip or vacation taken merely for a change in environment, improvement of morale, or general improvement of health, even if the trip is made on the advice of a doctor. However, see Medical Conferences , earlier.

Publication 502 also says:

Transportation
You can include in medical expenses amounts paid for transportation primarily for, and essential to, medical care.

You can include:

• Bus, taxi, train, or plane fares or ambulance service,
• Transportation expenses of a parent who must go with a child who needs medical care,
• Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and
• Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment

Transportation expenses you cannot include. You cannot include in medical expenses the cost of transportation in the following situations.
• Going to and from work, even if your condition requires an unusual means of transportation.
• Travel for purely personal reasons to another city for an operation or other medical care.
• Travel that is merely for the general improvement of one's health.
• The costs of operating a specially equipped car for other than medical reasons.

Lodging:

Next question is hotel costs for both trips. The language says that hotel lodging can be deducted if certain requirements are met. See below. The portion of lodging costs that are medical care related should be deductible, with a limit of $50 per person per day or $100 per couple per day. For the sperm donation/egg transfer trip lodging expenses for both partners should be deductible (you can include lodging for a person traveling with the person receiving medical care). The baby pick-up trip is slightly trickier, but the language does seem to allow up to $100 per day ($50 for one parent and $50 for the baby).

Lodging
You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to receive medical care. See Nursing Home , later.
You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. You can include the cost of such lodging while away from home if all of the following requirements are met.
1. The lodging is primarily for and essential to medical care.
2. The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital.
3. The lodging is not lavish or extravagant under the circumstances.
4. There is no significant element of personal pleasure, recreation, or vacation in the travel away from home.
The amount you include in medical expenses for lodging cannot be more than $50 for each night for each person. You can include lodging for a person traveling with the person receiving the medical care. For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Meals are not included.
Do not include the cost of lodging while away from home for medical treatment if that treatment is not received from a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital or if that lodging is not primarily for or essential to the medical care received.

Legal fees:

The language here is less precise. Because signing a legal contract with the clinic is “necessary for the medical care”, it seems that the legal fees are deductible. Publication 502 says:

Legal Fees
You can include in medical expenses legal fees you paid that are necessary to authorize treatment for mental illness. However, you cannot include in medical expenses fees for the management of a guardianship estate, fees for conducting the affairs of the person being treated, or other fees that are not necessary for medical care.
Once the baby is born, any medical expenses for the baby (rather than the gestational surrogate) are tax deductible, as the baby is the taxpayer’s dependent. Thus, it is helpful to ask the clinic and/or hospital to separate expenses for the surrogate and expenses for the baby.

Keep this in mind...

To be tax efficient, you may try to bundle expenses (surrogacy as well as other medical expenses) into one year. That way you don’t have to reach the 7.5% threshold in two consecutive years, for example.

Surrogacy related expenses may take you over the 7.5% threshold, but keep in mind that ALL medical expenses are deductibles. So don’t forget your dental charges, prescription contacts, mileage for travel to the doctor’s offices, insurance premiums, deductibles, etc. Publication 502 includes a longer list of deductions that are includable here.

Baby sitting expenses, even from a qualified nurse, and even if your baby was in the NICU, are not deductible. Unless the baby sitter is providing nursing services as defined by the IRS, which generally means doing something the doctor specifically prescribed. (So, Asha's expenses are not tax deductible.)

Note that there are adoption related tax credits, but they do not apply to surrogacy.

Tax Advice

Now you see why taxes are not cut and dry. An aggressive interpretation would many of the deductions mentioned above and worry about an audit later. A conservative interpretation might not take some of the grayer deductions. While I’d love to give you the standard advice to talk to your tax preparer, the reality is that your tax preparer probably doesn't have experience in this area. 

If you have feedback from your tax preparer that references either the IRS publications or IRS rulings, please do send them in and we’ll update any of the above as appropriate.

 

Memories

We've not got 4+ years of baby photos.  Mostly on the computer where nobody ever sees them.

We've printed a few out.  Then we have to decide what to do with them.  

We really like the acrylic frames for showing off the ones we print out.  They're very contemporary looking and don't take any focus away from the subject.

See the magnetic acrylic frames at Solitary Rock.