Interested in Egg Donation but worried about your tax income? Taxes can be very stressful and truthfully many aren’t sure how to deal with their donation compensation. Let’s dive into how it works and what is required by the Internal Revenue Services.
When you choose to donate your eggs, you will be given compensation for your time, energy, pain and of course your amazing oocytes. Egg donation is not earned income but you will need to report the earnings to the IRS no matter the amount received. You should report your compensation on a 1099-MISC in box 3. Now onto the tricky part, will this income be taxed at a 15% self-employment tax rate?
In the historical Perez v Commissioner case back in 2015, the courts ruled Perez was responsible for the tax payment on her $20,000 earned that year through egg donation. Perez claimed the funds were provided for her bodily pain and discomfort during the process. She felt these funds fell into the non taxable compensation.The court considered the case as a voluntary decision to better Perez’ financial status. In the end, she was taxed on her earnings and the case was closed.
Agencies are not required and do not issue 1099’s to the donors after a donation. The egg donation agency does not pay the donor, rather they are paid through a third party escrow company. A 1099 will not be issued through the Escrow Service or Intended Parent either, as these funds are held for a short time for personal services on behalf of the Intended Parents. But regardless, each donor is required and responsible to report the income to the IRS. We recommend going to your personal Certified Public Accountant, tax advisor or accountant to consult on the taxed income. Not reporting this income can result in penalties and interest down the road. Your trusted personal accountant can also help you with ways to offset your income with related tax deductions. This can include travel, meals, mileage, etc.
Egg Donation is a beautiful, rewarding gift you can give to a family. Both sides of the donation will be blessed in more ways than compensation and we believe will offset any tax requirement.