We study N=2 supergravity deformed by a genuine supersymmetric completion of the λR 4 term, using the underlying off shell N=2 superconformal framework. The gauge-fixed superconformal model has unbroken local supersymmetry of N=2 supergravity with higher derivative deformation. Elimination of auxiliary fields leads to the deformation of the supersymmetry rules as well as to the deformation of the action, which becomes a Born-Infeld with higher derivative type action. We find that the gravitino supersymmetry deformation starts from λ ∂ 4 F 3 and has higher graviphoton couplings. In the action there are terms λ 2 ∂ 8 F 6 and higher, in addition to original on shell counterterm deformation. These deformations are absent in the on shell superspace and in the candidate on shell counterterms of N=4, 8 supergravities, truncated down to N=2. We conclude therefore that the undeformed on shell superspace candidate counterterms break the N=2 part of local supersymmetry.