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Regarding egg donors and sperm donors there was an IRS PLR, private letter ruling, saying every once in awhile deductible for parents as a medical tremendous expense. Since infertility is a medical condition, helping along being pregnant could be construed as medical management.

Now we calculate if you have any income tax due. Assuming for once that not any other income exists, we calculate taxable income using the make money from the business ($20,000) and subtract common deduction (which is $5,950 for 2012) less the exemption deduction (which is $3,800 for 2012). The taxable income would then be $20,000 - $5,950 - $3,800 which equals $10,250. Based on tax law the extra earnings tax due for responsibility would be $1,099. So, the total tax bill for this taxpayer could well be $1,099 + $3,060 to your total of $4,159.

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