Is Egg Donor Compensation Taxable?
With the compensation egg donors receive usually described in an egg donation contract as payment for pain and suffering, time and inconvenience rather than for the eggs retrieved and donated, you may be wondering if the donor’s compensation from egg donation reportable income on your annual taxes is. The simple answer to this question is yes. In the eyes of the Internal Revenue Services (IRS), egg donation is considered to be compensation for services rendered, thus the payment from an egg donation is considered reportable taxable income.
When dealing with the human body, the tax laws can be a tricky subject. Recently in 2015, the United States Tax Court in the case of Perez vs. Commissioner, 144 T.C. 51 (2015) considered a donor’s argument that compensation for pain and suffering paid under an egg donation should be non-taxable. All parties agreed that an egg donation compensation was for the donor’s pain, suffering, time and inconvenience, and not for the actual sale of body parts. Under the US code, damages for pain and suffering, paid in settlements or lawsuits for personal injuries and accidents are non-taxable. However, the tax court determined that the compensation for “pain and suffering” to the donor in an egg donation is unlike the damages in a tort case. Instead, any pain and suffering experienced is on account of a medical procedure which the donor has consented to. Because any physical pain that the donor suffered was a result of performing a service contract for egg retrieval and not for an unwanted invasion against body, the compensation for the egg retrieval falls under the broad definition of income and was not exempt from tax. As a result, the compensation paid to an egg donor represents taxable income.
Some egg donor programs provide their donors with a 1099 tax form but if you don’t receive a 1099 form from the program, it is your legal responsibility to report any income you’ve earned from egg donation.
Note that not all compensation from egg donation is taxable. You may deduct out of pocket expenses related to going through the process such as your mileage, meals, and travel expenses. If these are paid to you in the form of allowances or reimbursements, this is not part of your income.
There are a lot of things to consider when deciding the compensation for donate eggs, and the taxable status of income should be one of them. It is best to discuss your taxes and income with your tax advisor so that they may properly advise you on your options.
Tsong Law Group has represented hundreds of donors from all over the world. If you are looking for an egg donation lawyer, please contact us today.
This article is for informational purposes only and should not be relied upon without additional research or consulting an attorney. This article is not legal advice and does not create an attorney-client relationship with the reader.