State Abortion Law Changes Tax Deductions

After the U.S. Supreme Court overturned the constitutional right to abortion, lawmakers in various states began enacting a variety of either so-called pro-choice or anti-abortion laws. One such law in Georgia bans abortion at the point where a “fetal heartbeat” can be detected by a doctor.

You may be wondering what the Georgia abortion law, or any other abortion law, has to do with taxes. Georgia’s Department of Revenue has clarified that a human fetus with a detectable fetal heartbeat can qualify for a tax deduction — if you reside in Georgia.

Even if you aren’t a Georgia resident, several other states could follow suit and start offering tax deductions for unborn children. (That's probably more likely now since the Alabama Supreme Court just ruled that embryos are children for purposes of Alabama state law.) 

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And while tax breaks are generally beneficial, fetus tax deductions raise new and important tax questions for states, the federal government, and taxpayers like you. Here's more of what you need to know.

Georgia fetus tax deduction

• In guidance, the Georgia Department of Revenue says that if you’re a Georgia resident, your fetus qualifies as a dependent for tax purposes as of July 20, 2022. 
• That means that pregnant people living in Georgia may be able to claim a tax deduction for their fetuses on their state tax returns.

Why did this happen? Well, Georgia's abortion law (also known as The Living Infants and Fairness Equality Act) was initially passed in 2019. But it was tangled in litigation because, at that time, it's abortion restrictions were at odds with Roe v. Wade. After the U.S. Supreme Court overturned Roe, Georgia's abortion law was allowed to take effect and amended to say that a fetus is a legal person in Georgia.

The amount of the dependent personal exemption is $3,000 for each unborn child. The Georgia DOR says the guidance applies to any taxpayer who has an unborn child with a detectable human heartbeat at any time on or after July 20, 2022.

For the 2023 tax year, the Georgia DOR has provided answers to frequently asked questions. Those Life Act Guidance FAQs explain that no Social Security number is required to claim the fetus dependent exemption and that no medical documentation has to be attached to the state tax return to claim a fetus.

"Taxpayers do not need to attach documents to their tax returns to claim the tax deduction provided by HB 481. Provision of medical documentation is only necessary if audited by the Department. This deduction would not trigger an audit on its own. In accordance with the advice of medical professionals and physicians, the Department recommends that people maintain accurate and appropriate medical records for the health and well-being of themselves and their families."

However, Georgia law requires a doctor to determine whether a “fetal heartbeat” can be detected. The state’s guidance points out that this can sometimes happen as early as six weeks into a pregnancy.

Initially, when the Georgia fetal heartbeat law was passed, unborn child deductions were claimed as “other adjustments” on Line 12 of Schedule 1 of Georgia’s tax Form 500. However, for the 2023 tax year, the state Department of Revenue says unborn children are claimed on the Georgia return as a dependent exemption.

What is a dependent?

Federal law doesn’t recognize a fetus as a person for tax purposes, so a fetus cannot be claimed as a dependent on your federal tax return.

Instead, rules for claiming a dependent on your federal return depend on the IRS definition of a “qualifying dependent.” That’s typically a child under 19 years of age, or under 24 years old if they are a full-time student. But a qualifying dependent can also be a child of any age that is permanently or totally disabled, or “qualifying relative.”

The IRS has different tests that can help you determine whether someone is a qualifying relative. There is also guidance on the agency's website to help you determine whether you are eligible to claim a dependent on your federal income tax return.

Unborn child tax questions

The fact that unborn children don’t qualify as dependents on your federal taxes could confuse taxpayers. 

• For example, if you’re a pregnant Georgia resident and want to claim the unborn child tax deduction, the number of dependents that you would claim could vary between your federal and state tax returns. 
• Typically, people claim the same number of exemptions and dependents on their federal and state returns.

In addition to potential tax confusion over what counts as a dependent, fetus tax deductions raise other practical questions. Some common questions posed by policymakers and media in response to Georgia’s law involve situations like surrogacy, and miscarriage. 

For instance, in the case of miscarriage, would a fetus tax deduction granted early in the pregnancy later be disallowed? (Georgia guidance says the deduction for a deceased dependent would be allowed.) 

With surrogacy, would the surrogate be allowed to claim the unborn child deduction? Or would the fetus deduction be reserved for the legal parent or parents? Would state child tax credits be made available for a fetus?

Taxes and tax law can be complicated, so it’s hard to know how the fetus tax deduction might impact Georgians going forward.

Alabama IVF ruling

In the meantime, no matter which side of the abortion rights debate you are on, it’s important to know that since the Supreme Court ended the right to abortion, more states may consider a fetus to be a legal “person.”  

For example, as mentioned, Alabama's Supreme Court has ruled that embryos are children for purposes of state law. The Feb. 16 ruling, which has already changed the IVF landscape in Alabama, stemmed from wrongful death cases involving dropped embryos. 

Consequently, while Georgia is the first state to allow a tax deduction for a fetus, it might not be the last.

Bottom line: Stay informed

What can you do? As with any law change, it is important to stay informed.

• Keep an eye on related tax provisions in your state and on legislative changes that could impact your healthcare and finances.
• Additionally, if you currently reside in Georgia, you may want to consider any potential impacts of claiming an unborn child as a dependent. 
• You will also need specific guidance from the state on what medical documentation is required. That information could help you determine which tax deductions do or don’t, make sense for you.

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