Feb 20

Are Egg Donation Fees Tax-Exempt?

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We will soon find out. Well, at least before the end of 2014, we will.

Generally, Egg Donors are compensated for the inconvenience, pain and suffering related to egg donation. Egg Donation Agreements usually include a provision that the law is unsettled regarding the tax implications for the fees associated with the Agreement, and that a tax expert should be consulted. As an attorney, and not an accountant, I cannot advise my egg donor clients of the tax consequences of receiving these funds. Anecdotally, I have heard stories going both ways — donors who were taxed, and donors who were not taxed because the compensation is not employment — it is for pain and suffering.

Nichelle Perez, and egg donor in California, received two fees of $10,000.00 each for egg donation. She did not report the fees as income. However the egg donation agency, The Donor Source, reported to the IRS that it had paid her. The IRS has requested Perez pay taxes on the amount, as it is deeming the egg donation “an act of commerce.” Perez has challenged the IRS, and a U.S. Tax Court will be making the decision this year.

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