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Adoption Credits

Tax benefits for adoption include both a tax credit for qualified adoption expenses paid to adopt an eligible child and an exclusion for employer-provided adoption assistance.

Qualified Adoption Expenses

Qualified adoption expenses for both the credit and the exclusion include reasonable and necessary:

  • Adoption fees
  • Court Costs
  • Attorney Costs
  • Traveling Expenses (includes meals/lodging expenses when away from home)
  • Other Expenses directly related to legal adoption purpose.

Non-Qualifying Expenses

  • Expenses in connection with surrogate parenting
  • Expenses incurred to adopt the child of the taxpayer’s spouse
  • Expenses reimbursed by your employer or other organization
  • Expenses violating federal or state law

Eligible Child

  • Any child under age 18. If the child turned 18 during the year, the child is considered eligible for the part of year they were under age 18.
  • Any physically or mentally disabled person unable to self-care.

Requirements to Claim Credit

  • The qualifying child must be under age 18, or is physically or mentally incapable of self-care.
  • You can claim the credit for any filing status, but if married filing separately, the following must be true:
    • You lived apart from your spouse during the last 6 months of the year.
    • The eligible child lived in your home for more than half of the current tax year.
    • You paid over half the cost of keeping your home.
    • You meet all other requirements.
  • Certain income-limits apply to single and joint filers. If you paid qualifying adoption expenses, you might qualify for a credit of up to $12,650 for each child you adopted.The credit amount depends on your income. The credit is reduced if your adjusted gross income (AGI) is more than $189,710 . The credit is eliminated if you earn more than $229,710.
  • You are able to report the eligible child’s name, year of birth and identifying number.
  • You meet at least one of these conditions:
    • The adoption expenses were paid in the prior tax year, but the adoption was not final that year.
    • The adoption expenses were paid in the current tax year and the adoption was final in or before the current tax year.
    • The adoption of a special needs child was final in the current tax year.
    • The adoption expenses were paid after 1996 and the child is a foreign eligible child whose adoption became final in the current tax year.
    • You carried unused Adoption Credit forward from a prior year. Note that credit carried forward is treated as refundable, even though the credit was nonrefundable in prior years.

Acceptable Documents

You must provide documents substantiating the adoption. Depending on the type of adoption, acceptable documents include:

  • An adoption order or decree;
  • An adoption certificate;
  • Or the child’s visa for entering the United States (for a foreign adoption).

For domestic adoptions that are not final, or for adoptions of a special-needs child, different documents apply.

Timing of Expenses and Credit

Most taxpayers claim the credit in the year their adoption is final. There are some allowable exceptions and requirements:

  • For a domestic adoption, you may claim the credit for in a tax year before the adoption is final, but must wait to claim the credit until the next tax year.
  • You may not claim the credit for a foreign adoptions until the year the adoption is final. Expenses from previous years are treated as paid or incurred in the year the adoption is final.
  • For both domestic and foreign adoptions, you can claim the credit against expenses incurred in years after the adoption is final. The credit is allowable for the tax year you incurred or paid the qualifying expenses.
  • Expenses for an unsuccessful domestic adoption may be included with expenses for a successful later adoption, possibly increasing the credit.

Employer Provided Benefits

  • If your employer provides an adoption assistance program you may be able to exclude from income the expenses paid on your behalf.
  • The expenses must be paid directly to you or a third party for qualified adoption expenses. Employer-provided adoption benefits may reduce your salary and are generally reported in B
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