Most surrogacy expenses are not eligible for the tax credit, tax court rules



In two decisions released earlier this month, the Tax Court of Canada ruled that most surrogacy expenses do not qualify for the medical expense credit

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In two decisions released earlier this month, the Tax Court of Canada ruled that most surrogacy expenses do not qualify for the medical expense credit.


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The first case involved a taxpayer who claimed a medical expense tax credit for just over $ 29,000 of medical expenses incurred in 2012, the bulk of which went to SCI Healthcare (SCI) in India. The taxpayer fertilized a donated egg and the embryo was then implanted into a surrogate mother in India.

The taxpayer claimed $ 1,400 for a trip to India and $ 400 for meals during his eight-day trip, explaining that he had traveled to India to undergo in vitro services provided by SCI because his sperm had been used in the creation of the embryo to be implanted in the surrogate mother.

Although the court ruled that her medical expenses and travel were indeed eligible for the medical expense credit, it found that none of the surrogate-related expenses were eligible. The reasoning was based on the definition of “patient” in the Tax Act.


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Under the rule, medical expenses “on behalf of the patient who needs an (n)… organ transplant” are eligible for the credit. While an earlier case concluded that an embryo transplant is, in fact, an organ transplant for the purposes of this rule, this decision was not followed in two subsequent cases. Each of these cases concluded that the rule does not apply to surrogacy arrangements because the surrogate mother receiving the transplant is not the “patient” who is defined for purposes of the Tax Act as. the taxpayer, his or her spouse or partner and dependents.

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The second case involved a taxpayer who claimed $ 81,000 in medical expenses in his return, of which $ 64,000 was related to the indemnity paid and the surrogate’s medical expenses. In vitro expenses of $ 17,000 incurred by the taxpayer were authorized.

After being denied the expenses based on the above reasoning, the taxpayer in this case also attempted to argue that same-sex couples are discriminated against because of the tax rules. According to her argument, “they deserve the same treatment as heterosexual couples and same-sex women who have the option of claiming the medical expense tax credit for in vitro fertilization treatments … because male couples homosexuals do not have ovaries to produce eggs and uteri. in order to procreate a fetus, they have to work with surrogate mothers, which same-sex heterosexual and female couples do not have to do.


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The question before the Court was therefore whether the fact that the surrogacy expenses were not deductible violated the anti-discrimination rule in section 15 of the Canadian Charter of Rights and Freedoms.

The Supreme Court has said that to be successful with a discrimination argument, you must show “unequal treatment under the law – specifically that (you) … did not receive a benefit that the law intended … or (you were) with a burden the law didn’t put it on someone else.

In that case, the Tax Court judge ruled that there was no discrimination “since surrogacy expenses are systematically non-deductible for anyone, whether they are heterosexual couples, same-sex female couples or same-sex male couples… The burden imposed by law on same-sex male couples is no greater than that imposed on anyone else.

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Jamie Golombek is Managing Director, Tax and Estate Planning at CIBC Wealth Advisory Services in Toronto.


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