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Adoption Benefits FAQs

Q.1 When did the Adoption Credit become a non-refundable credit?

The Adoption Credit was non-refundable for tax years 1997 through 2009 and was refundable for tax years 2010 and 2011. Carry forwards from tax years 2005 through 2009 were refundable for in tax year 2010. The Adoption Credit became non-refundable again for tax years beginning after December 31, 2011.

A credit reduces your tax liability. If the credit is non-refundable, your liability may be reduced to, or not below, zero. For example, if your tax liability for the year is $14,000 and your credit is $11,000, your tax liability will be reduced to $3,000 ($14,000 less $11,000). But if your tax liability is $9,000 in a tax year and your credit is $11,000, you may use only $9,000 against your tax liability for that year. However, you may carry forward the $2,000 unused Adoption Credit for up to five tax years.

What should I know about claiming the Adoption Credit for tax year 2013?

  1. The maximum amount of the credit for each eligible child is $12,970. Therefore, you may be able to reduce your tax liability for tax year 2013 by up to $12,970.
  2. You can carry any unused credit forward up to five tax years.
  3. For tax year 2013 returns, the credit begins to phase out if your modified adjusted gross income (MAGI) is more $194,580. The credit is completely eliminated if your MAGI for tax year 2013 equals or exceeds $234,580.

Q.2  How do I file my 2013 tax return to claim the Adoption Credit?

The Adoption Credit is claimed on Form 8839, Qualified Adoption Expenses. Beginning with the 2013 tax year, you can e-file Form 8839. You must use Form 1040, rather than Form 1040A or 1040EZ, when claiming the Adoption Credit. Refer to Instructions for Form 8839 Qualified Adoption Expenses and chart for additional information. Note: Form 8830 could not be e-Filed for tax years 2010,2011, 04 2012.

You do not need to send in copies of receipts, cancelled checks, bank statements, adoption decrees or other documents when you e-File or mail your return and your Form 8839. However, you should keep all documents you used when claiming an Adoption Credit for your records.

Q.3  What is the Adoption Credit?

The adoption tax credit offsets qualified adoption expenses, making adoption possible for some families who could not otherwise afford it. Your tax liability may be reduced if you adopt an eligible child and qualify for the Adoption Credit.

Q.4  How do I qualify to claim the Adoption Credit?

Generally, you may qualify for the Adoption Credit if you adopted an eligible child and paid qualified adoption expenses in connection with the adoption. The amount of the tax credit is as much as $12,970 for tax year 2013. If you attempt to adopt a U.S. child, you may be able to claim the credit even if the adoption does not become final. If you adopt a U.S. child with special needs, you may qualify for the full amount of the Adoption Credit even if you paid little or no adoption-related expenses, if the adoption is final. A child is a U.S. child if he or she was a citizen or resident of the United States (including U.S. possessions) at the time the adoption attempt began.

Q.5  What are qualified adoption expenses?
 

Qualified adoption expenses are reasonable and necessary expenses paid in connection with, and for the principal purpose of, legally adopting an eligible child. Qualified adoption expenses include: court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging while away from home), and other expenses directly related to the legal adoption of an eligible child.

Qualified adoption expenses do not include expenses: for adopting your spouse’s child, for a surrogate parenting arrangement, that violate state or federal law, paid using funds received from a federal, state, or local program, paid or reimbursed by your employer or otherwise, or allowed as a credit or deduction on a federal tax return.

Qualified adoption expenses paid in connection with a foreign adoption (where the child was not a U.S. citizen or resident when the adoption effort began) can be claimed only if the adoption of the foreign child becomes final.  

Q.6  Who is an eligible child?

An eligible child is: a child under the age of 18, or an individual, regardless of age, who is physically or mentally incapable of caring for him or herself.

Q.7  What documents should I keep for my records?

You should keep the following documents: receipts for qualified adoption expenses, cancelled checks, bank statements, entry visas for foreign adoptions, final decree, certificate or order of adoption, home study by an authorized placement agency, child placement agreements or court orders, and determination of special needs status by a State, the District of Columbia, or U.S. possession.

Q.8  Who is a child with special needs for purposes of the Adoption Credit?

A child is a child with special needs if all three of the following statements are true.

  1. The child was a citizen or resident of the United States or its possessions at the time the adoption effort began (U.S. child).
  2. A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents’ home.
  3. The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. Factors used by states to make this determination include:
    a. The child’s ethnic background and age,
    b. Whether the child is a member of a minority or sibling group, and
    c. Whether the child has a medical condition or a physical, mental, or emotional handicap.

You may be able to claim an exclusion or credit for the adoption of a U.S. child with special needs even if you did not pay any qualified adoption expenses. See the Refer to Instructions for Form 8839 Qualified Adoption Expenses at Column (d) for examples. 

Q.9  What is the income exclusion for employer-provided adoption benefits?
 

An employer may have a written qualified adoption assistance program to help employees with qualified adoption expenses. Under the program, the employer may either reimburse your expenses or pay the expenses for you. In either case, you may be able to exclude from income the amounts your employer paid. The maximum exclusion for employer-provided adoption assistance is $12,970 for tax year 2013.

If the employer pays or reimburses a particular expense, you may not claim the same expense for the credit. However, you may be able to claim an exclusion for the qualified adoption expenses your employer paid and a credit for different and unreimbursed qualified adoption expenses that you paid yourself.

Q.10  Where can I find more information about the Adoption Credit?

See Form 8839, Qualified Adoption Expenses, and the accompanying instructions, which contain additional information. See also Tax Topic 607, Adoption Credit and Adoption Assistance Programs.

The following tables explain when you should take the credit:
 

 Adopting a child who is a U.S. citizen or resident.
 IF you pay qualifying expenses in…  THEN take the credit in…
 Any year before the year the adoption is final  The year after the year of the payment.
 The year the adoption is final  The year the adoption is final.
 Any year after the year the adoption is final  The year of the payment.

 

 Adopting a foreign child.
 IF you pay qualifying expenses in…  THEN take the credit in…
 Any year before the year the adoption is final  The year the adoption is final.
 The year the adoption is final  The year the adoption is final.
 Any year after the year the adoption is final  The year of the payment.


The following tables explain when to exclude employer-provided adoption assistance from your income:
 

 Adopting a child who is a U.S. citizen or resident.
 IF your employer pays for qualifying expenses under an adoption assistance program in…  THEN take the exclusion in…
 Any year  The year of the payment.

 

 Adopting a foreign child.
 IF your employer pays for qualifying expenses under an adoption assistance program in…   THEN take the exclusion in…
 Any year before the year the adoption is final  The year the adoption is final.
 The year the adoption is final  The year the adoption is final.
 Any year after the year the adoption is final  The year of the payment.
Note: If your employer makes a payment in a year before the adoption is final, you include the amount in your income for the year. When the adoption is final, exclude the amount from your income on your return for that year.


Q.11  What are the guidelines for taking the adoption for 2012?

To claim the adoption tax credit for tax year 2012, complete and attach Form 8839 to your federal tax return. Refer to the Form 8839,Qualified Adoption Expenses instructions and chart for additional information. For tax year 2012 you cannot e-File. When you file your paper tax return, you will need to attach the completed Form 8839 to your return and send it to the IRS.
You do not need to send in receipts or documents when you mail your return, however, you should keep all the documents used to calculate your adoption tax credit for your records

The American Taxpayer Relief Act of 2012 (H.R.8) enacted on January 2, 2013, permanently extended the Adoption Credit and the adoption assistance programs for tax years beginning after December 31, 2012.


General Adoption Tax Credit information for Tax Year 2010 and 2011

The Patient Protection and Affordable Care Act (PL 111-148), also known as the Affordable Care Act , made the credit refundable for 2010 and 2011.  To claim the credit for 2010 and/or 2011, attach both Form 8839 and the required adoption-related documentation to your federal tax return. You cannot file a tax return with the adoption credit electronically. You must file a paper tax return.

 

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Page Last Reviewed or Updated: 07-Feb-2014