Adoption Tax Credit

Adoption Tax Credit

The legal and other expenses of adopting a child can be significant. The law permits adoptive parents to claim a credit against their federal tax for up to $11,390.00 for tax year 2007. The adoption of a ―Special Needs‖ child does not require the taxpayer to have qualifying expenses.

The IRS defines a special needs child as:
 A citizen of the U.S.
 The state determines that the child cannot or should not be returned to his or her parents
 Probably will not be adopted unless adoption assistance is provided to the adoptive parents
 Can also include ethnic background, age, member of minority or sibling group, or mental/physical handicap

If the state determines your child to be special needs, keep that documentation. Qualifying expenses are defined as reasonable and necessary expenses directly related to a legal adoption.

Examples include:
 adoption fees
 court costs/attorney fees
 medical expenses
 travel expenses
 other expenses related to the adoption of an eligible child

Excluded or non-qualifying expenses include:
 adoption of a spouse’s child
 expenses paid or reimbursed by federal, state or local programs
 expenses allowed as a credit or deduction under another income tax rule
 expenses that violate a federal or state law

An eligible child must be
 under age 18, or
 mentally or physically disabled

Tip: The Adoption Tax Credit may be carried forward and used on subsequent tax returns up to 5 years.

For more information, see IRS Form 8839, Qualified Adoption Expenses.