Is Cord Blood Banking Tax Deductible?

In 2007, the National Marrow Donor Program estimated a 100 percent increase in cord blood stems use. It is the great hope and anticipation of many that in the years to come cord blood will be used to cure many more diseases including diabetes, kidney ailments and even spinal cord injuries. While many parents agree that getting and saving cord blood is worthwhile, actually taking action often boils down to economics. The average cost is close to $2,000 for 18 years of storage, and it often requires a few hundred dollars be paid up front. The laws around tax relief for those who do bank cord blood are not always clear. Perhaps clarifying them below will help in the decision making process for many anxious parents.

What the IRS Says

Come tax time if you itemize expenses on your 1040 form, you can claim a deduction for any medical expense which exceeds 7.5 percent of your Adjusted Gross income.
To help you figure out what is and is not deductible, the IRS publication number 502 titled "Medical and Dental Expenses" will give you a listing of allowed deductions. This publication makes no mention of cord blood banking.

FSAs Can Offer Tax Relief for Getting Cord Blood to the Bank

Your employer may offer a benefit known as Flexible Spending Accounts (FSA). FSAs are specifically designed to provide some tax relief for health care expenses. Employees that take advantage of FSAs must decide at the beginning of each year how much money to withold from their regular paycheck. This money will be put into the FSA and is only taken out on a tax-free basis for medical expenses that qualify under your plan.
Check to see if your employer's FSA plan considers cord blood banking as a qualified expense. If so--you can avoid paying taxes on the money spent for the procedure.

Special Circumstances for Getting Tax Relief to Store Cord Blood

If there is a diagnosed medical condition for which cord blood might make a difference, there is a chance that money in your FSA can also be used to store blood in addition to retrieving it. You will need to make sure you have proper medical documentation related to the diagnoses to include with your tax return.

Congress Steps In?

In September 2006, a bill was introduced into Congress to allow for individuals and families to get a tax credit if they paid for cord blood banking. The bill was referred to the House Committee on Ways and Means for further study, but to date nothing has come of it.

The Great Cord Blood Debate--Life Insurance or Health Insurance?

To add to the confusion, the IRS will let you take deductions for health insurance premiums. Deductions on life insurance premiums, however, are not allowed. Unfortunately for those hoping to get a break come tax time, the legality of deducting cord blood banking depends on whether it is classified as part of one's health insurance or life insurance. To date the answer remains as clear as mud--and unanswered.

Resources

• Cord Blood Registry