Instructions for Form 8839 (2009)

Purpose of Form

Use Form 8839 to figure the amount of your adoption credit and any employer-provided adoption benefits you can exclude from your income. You can claim both the credit and the exclusion for expenses of adopting an eligible child. For example, you can claim a credit of up to $12,150 and also exclude up to $12,150 from your income. But, you cannot claim both a credit and an exclusion for the same expenses.

Adoption credit. Use Form 8839, Part II, to figure the amount of adoption credit you can take on Form 1040, line 52, or Form 1040NR, line 48. You may be able to take this credit in 2009 if any of the following statements are true.

You paid qualified adoption expenses in:
1. 2008 and the adoption was not final at the end of 2008, or
2. 2009 and the adoption became final in or before 2009.
You adopted a child with special needs and the adoption became final in 2009. (In this case, you may be able to take the credit even if you did not pay any qualified adoption expenses.)
You paid qualified adoption expenses in connection with the adoption of an eligible foreign child in:
1. 2009 or prior years and the adoption became final in 2009, or
2. 2009 and the adoption became final before 2009.
  See the instructions for line 1, column (e), on page 3.
You have a carryforward of an adoption credit from a prior year.

Income exclusion for employer-provided adoption benefits. Use Form 8839, Part III, to figure the amount of employer-provided adoption benefits you can exclude from your income Form 1040, line 7, or Form 1040NR, line 8. You may be able to exclude these benefits from income if your employer had a qualified adoption assistance program (see Employer-Provided Adoption Benefits beginning on this page) and any of the following statements are true.

You received employer-provided adoption benefits in 2009. However, special rules apply for benefits received in connection with the adoption of an eligible foreign child. See the instructions for line 1, column (e), on page 3.
You adopted a child with special needs and the adoption became final in 2009.
You received employer-provided adoption benefits in connection with the adoption of an eligible foreign child in:
1. 2009 or prior years and the adoption became final in 2009, or
2. 2009 and the adoption became final before 2009.
  See the instructions for line 1, column (e), on page 3.

You must complete Form 8839, Part III, before you can figure the credit, if any, in Part II.

You cannot exclude employer-provided adoption benefits if your employer is an S corporation in which you own more than 2% of the stock or stock with more than 2% of the voting power.

Definitions

Eligible Child

An eligible child is:

Any child under age 18. If the child turned 18 during the year, the child is an eligible child for the part of the year he or she was under age 18.
Any disabled person physically or mentally unable to take care of himself or herself.

If you and another person (other than your spouse if filing jointly) adopted or tried to adopt an eligible child, see the instructions for line 2 on page 4
(or line 19 on page 6, if applicable) before completing Part II (or Part III).

Qualified Adoption Expenses

Qualified adoption expenses are reasonable and necessary expenses directly related to, and for the principal purpose of, the legal adoption of an eligible child.

Qualified adoption expenses include:

Adoption fees,
Attorney fees,
Court costs,
Travel expenses (including meals and lodging) while away from home, and
Re-adoption expenses relating to the adoption of a foreign child.

Qualified adoption expenses do not include expenses:

For which you received funds under any state, local, or federal program,
That violate state or federal law,
For carrying out a surrogate parenting arrangement,
For the adoption of your spouse's child,
Paid or reimbursed by your employer or any other person or organization, or
Allowed as a credit or deduction under any other provision of federal income tax law.

Employer-Provided Adoption Benefits

Employer-provided adoption benefits are amounts your employer paid directly to either you or a third party for qualified adoption expenses under a qualified adoption assistance program. Generally, a qualified adoption assistance program is a separate written plan set up by an employer to provide adoption assistance to its employees. For more details, see Pub. 15-B, Employer's Tax Guide to Fringe Benefits.

Employer-provided adoption benefits should be shown in box 12 of your Form(s) W-2 with code T. Your salary may have been reduced to pay these benefits. You may also be able to exclude amounts not shown in box 12 of your Form W-2 if all of the following apply.

You adopted a child with special needs. See the instructions for line 1, column (d), on page 3 for the definition of a child with special needs.
The adoption became final in 2009.
Your employer had a qualified adoption assistance program as described on page 1.

Who Can Take the Adoption Credit or Exclude Employer-Provided Adoption Benefits?

You may be able to take the credit or exclusion if all three of the following statements are true.

Your filing status is single, head of household, qualifying widow(er), or married filing jointly. Generally, if you are married, you must file a joint return to take the credit or exclusion. However, if you are married and filing a separate return, you may be able to take the credit or exclusion on a separate return if you are considered unmarried because you are legally separated or living apart from your spouse and you meet certain other requirements. See Married Persons Filing Separate Returns below.
Your modified AGI is less than $222,180 or you have a carryforward of an adoption credit from a prior year. To figure your modified AGI, see the instructions for line 8 on page 5 (for the credit) or line 26 on page 6 (for the exclusion).
You report the required information about the eligible child in Part l.

Married Persons Filing Separate Returns

You may be able to take the credit or exclusion if all of the following apply.

Statements (2) and (3) above under Who Can Take the Adoption Credit or Exclude Employer-Provided Adoption Benefits are true.
You lived apart from your spouse during the last 6 months of 2009.
The eligible child lived in your home more than half of 2009.
You provided over half the cost of keeping up your home.

When To Take the Credit or Exclusion

When you can take the adoption credit or exclusion depends on whether the eligible child is a citizen or resident of the United States (including U.S. possessions) at the time the adoption effort begins.

Child who is a U.S. citizen or resident. If the eligible child is a U.S. citizen or resident, you can take the adoption credit or exclusion even if the adoption never became final. Take the credit or exclusion as shown in the following tables.

IF you pay qualifying expenses in...	THEN take the credit in...
Any year before the year the adoption becomes final	The year after the year of the payment.
The year the adoption becomes final	The year the adoption becomes final.
Any year after the year the adoption becomes final	The year of the payment.

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.

Children with special needs.

If you adopt a child with special needs you can claim $12,150 (minus any qualified adoption expenses claimed for the same child in a prior year) in the year the adoption becomes final even if you did not have any qualified adoption expenses. See the instructions for line 1, column (d), on page 3 for more information.

Foreign child. If the eligible child is not a U.S. citizen or resident, you cannot take the adoption credit or exclusion unless the adoption becomes final. Take the credit or exclusion as shown on the following tables.

IF you pay qualifying expenses in...	THEN take the credit in...
Any year before the year the adoption becomes final	The year the adoption becomes final.
The year the adoption becomes final	The year the adoption becomes final.
Any year after the year the adoption becomes final	The year of the payment.

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 becomes final	The year the adoption becomes final.
The year the adoption becomes final	The year the adoption becomes final.
Any year after the year the adoption becomes final	The year of the payment.

If your employer makes adoption assistance payments in a year before the adoption of a foreign child is final, you must include the payments in your income in the year of the payment. Then, on your return for the year the adoption becomes final, you can make an adjustment to take the exclusion.

Your employer is not required to withhold income tax on payments for qualifying expenses under an adoption assistance program. If you must include the payments in income in the year paid because your adoption of a foreign child is not final, your withholding may not be enough to cover the tax on those payments. You may need to give your employer a new Form W-4 to adjust your withholding, or make estimated tax payments, to avoid a penalty for underpayment of estimated tax.

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