The short answer is no, you will not pay taxes as most surrogacy agencies are not issuing 1099 forms for surrogate compensation, as it is paid out often under tax codes and terms deemed not required to pay taxes.
When you decided to become a surrogate, you’ve probably had a few thoughts about what you’re going to do with your compensation. Maybe you’re going to put a down payment on a house, or maybe you want to make a much-needed contribution to your child’s college savings. Perhaps you even have plans to take your family on a vacation when your surrogacy journey is all said and done.
Before we get into the details of taxes on surrogacy compensation, remember that this information should not be taken as financial or legal advice – it is always best to consult with your tax advisor to be sure.
In all three of my surrogacy journeys, my CPA advised me that I did not have to pay taxes since I was not issued a 1099 and it was not reported as income. Apparently, compensation for surrogacy is coded similarly to settlements for pain and suffering or reimbursements for expenses incurred.
Tax law and surrogacy is a legal gray area currently, so I would advise it’s best to consult your tax professional or CPA and see what it will look like for you. And set aside a chunk of your compensation just in case tax laws change during your journey.