Monday, May 13, 2013

Health Care Bill Raises Cost of Infertility Treatments in 2013

Buried in the 2,000 page health care reform bill is tax language that will raise the cost of infertility treatments beginning in 2013. Many infertility treatments are self paid: most insurance plans provide no coverage, so couples trying to conceive must pay out of pocket. These expenses are tax deductible, but the bill raises the threshold for itemized deductions beginning in 2013, thereby raising costs.

Most insurance plans provide little or no coverage for infertility treatments. Only fourteen states mandate some level of infertility coverage, and these laws contain many exceptions and loopholes. Couples trying to conceive must often pay expenses for infertility treatment out of pocket.

Couples do get some relief for un-reimbursed medical expenses through the tax code. Most of the non-covered infertility treatment options are considered tax deductible. This list includes diagnostic testing, fertility drugs, IVF and other assisted reproductive techniques, as well as travel costs.

However the IRS limits these deductions to the amount over 7.5% of adjusted gross income. Adjusted gross income is the total income earned by a couple. Take for example a couple undergoing one IVF cycle. The average cost of IVF is about $12,000. If the couple has a $100,000 adjusted gross income (AGI), their threshold is $7,500. This means the couple can deduct $4,500 of their IVF costs, saving about $1,125 in taxes if they are in the 25% tax bracket.

Beginning in 2013 the Health Care Reform Bill stipulates that the threshold for itemized deduction for un-reimbursed medical expenses will be increased from7.5% of adjusted gross income to 10.0%. In the example above this lowers the eligible deduction to $2,000 and the tax savings to $500.

More than ever before, couples trying to conceive need to understand infertility insurance mandates, the tax code, and how to leverage supplemental insurance.

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