While surrogacy can create a worthwhile income for many surrogates, you might be wondering how this income relates to an income from a 9 to 5 when tax season approaches.

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So, do surrogates get taxed? The answer depends on your situation.

Does Surrogate Pay Get Taxed?

Some agencies or escrow services may send you a 1099 form, which would mean you’d be required to file your surrogacy income. You won’t have any taxes taken out of the income you receive from being a surrogate mother. Which means, you will have to set aside some money or find other resources to pay the taxes on it. Your surrogacy specialist and surrogacy attorney will help you find any resources to ensure you are filing your taxes correctly.

However, you may not receive a 1099 form, which is also somewhat common. A good surrogacy lawyer should include a clause about the taxes of surrogate income in your surrogacy contract. It should include who is responsible for paying the taxes that a surrogate may or may not incur on their surrogate compensation. You should have a conversation about how your income will be taxed and how to handle it come tax season with your attorney so you can be well prepared.

How Does Surrogate Income Get Exempt?

• Gift – You may be able to avoid taxes by claiming the income as a gift from the intended parents. This is the most common way to make your surrogate income tax-exempt.
• Pain and Suffering – Surrogacy doesn’t exactly meet the list of excludable injuries listed in Sec 104 of the Internal Revenue Code that describes qualified non-taxable incomes due to pain and suffering. However, some tax professionals may recommend this route. This isn’t the most common way to make your surrogate income tax-exempt., and is not recommended.
• Pre-Birth Child Support – Since child support is tax-exempt, filing your surrogacy income as pre-birth child support can help you avoid tax liability. Again, this is not common, and professionals are not sure how this would hold up in court.

Talk With a Tax Specialist

You should always talk with a professional in the industry when it comes to sorting out your taxes. While your surrogate income is yours to spend how you wish, it’s important to be aware of how the IRS will view your income. Talking with your accountant, a tax specialist or your surrogacy attorney is a good idea before making any major purchases with the income.

In most cases, your surrogacy attorney will be able to assist you through this process. They will also generally be able to find a reason to prevent you from needing to pay taxes on the compensation.

If you have more questions about your gestational surrogate compensation and taxes, fill out our online form or contact us today at 1-800-875-2229 (BABY).

Disclaimer: The information in this article should not be taken as financial or legal advice. Please contact a tax lawyer for information on tax laws in your state.