Adoption Tax Credit

Adoption isn't cheap, whether one is spending a few thousand for home studies, a couple thousand in birth mother expenses or even more in travel fees to an adoptee's country of origin. Once all is said and done, the service fees and expenses can run upwards of $40,000. That's a tough total to budget, especially when an individual or couple is starting or expanding their family. Fortunately, adopters can claim their adoption expenses on their taxes and receive up to a third of their fees in their tax return. In 2010, the maximum amount refunded could reach up to $13,170.

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Tax credits, unlike federal or states subsidies provided for public adoptions, can be awarded regardless of the child's special needs and health. Qualifying the adoption tax credit does, however, require the adopter have paid out of his or her own pocket for the adoption of a child under 18 years old. It cannot be applied to surrogate services or fees as well as stepparent adoptions. The credit also is inapplicable to expenses that have already been paid for or reimbursed by the federal or state government subsidies, as is common for public adoption home study fees. The credit also does not apply to any adoption fees paid before 1997.

Expenses that qualify for the adoption tax credit include adoption agency and/or attorney fees, court costs, travel expenses, re-adoption expenses and fees associated with international adoptions.

To calculate and receive the credit, adopters much fill out IRS Form 8839. The Form 8839 will need to then be attached to Form 1040. The tax credit amount should be entered on Form 1040 on line 52 with "box b" marked off.

Claiming one's tax credit can be done any time after an adoption is finalized, although sometimes adopters may have to wait up to a year before filing for the adoption tax credit. This is more likely to be true for those who adopted internationally. International adoptions are eligible for a tax credit only after the adoptee is issued a visa. This can delay the adoption finalization if the child was adopted from a country, such as Korea, that does not finalize its adoptions in-country. Other delays may occur if a state requires a child whose adoption was finalized overseas be, essentially, "re-adopted" in the state courts.