Surrogacy Costs:  Parents to Receive Tax Credits

Paying a surrogate to bear a child is illegal in Canada.  Yet, the Nova Scotia government recently introduced a new refundable tax credit for surrogacy-related medical expenses, a first in Canada.  The federal government, too, proposed a similar provision in the April 7 Federal Budget, to provide for tax relief for reimbursements paid to the “patient”, the surrogate.

In Nova Scotia’s case, the credit will be equal to 40% of the cost of fertility expenses and other costs to a maximum annual claim of $20,000.  When you do the math that equals a maximum refundable claim of $8000.

Federally, fertility treatments have been claimable since 2017, but the costs are limited for the purposes of claiming the medical expense tax credit.  Costs of surrogacy, fees for obtaining eggs or sperm from a donor or donor organization have not been eligible, until now.

On December 21, 2021, however, in his mandate letter to the Minister of Finance, however, the Prime Minister directed the Finance Minister to :

“Introduce amendments to the Income Tax Act to make anti-abortion organizations that provide dishonest counselling to pregnant women about their rights and options ineligible for charitable status, and to expand the Medical Expense Tax Credit to include costs reimbursed to surrogate mothers for IVF expenses.”

Specifically, Section 118 of the Income Tax Act will be expanded.   The definition of “patient” for claiming medical expenses will be expanded to include a surrogate mother or the donor of sperm, ova, or embryos. The reimbursement of medical expenses to such individuals will be considered to be a medical expense of the reimbursor, not the patient.  Fees paid to acquire donated sperm or ova will also be eligible medical expenses, as will fees paid to fertility clinics and donor banks. 

For the surrogate mom, meanwhile, the budget is silent on how the expenses are treated.  Would payments received be reported either as income?  This would contravene the law it appears.