Adoption Tax Credit

Post Date: 8/4/11
Last Updated: 8/4/11


Taxpayers who are adopting a child in 2011 need to be aware of the information needed to properly file for the adoption tax credit. The Affordable Care Act increased the amount of the credit and made it refundable.

Adoption tax credit. The adoption tax credit, which is as much as $13,170, is designed to offset qualified adoption expenses. Taxpayers who adopt a child in 2010 or 2011 may qualify for the credit if qualified expenses relating to the adoption, or an attempted adoption, were paid.

Phaseout. The adoption credit begins to phase out for taxpayers with modified adjusted gross income of more than $182,520 in 2010 and is fully phased out for taxpayers with modified adjusted gross income of more than $222,520. The IRS has indicated that inflation adjustments may be made for 2011 to the phaseout amount, as well as to the maximum credit amount.

Failed adoption. Taxpayers may be able to claim the credit even if the adoption does not become final. Taxpayers who adopt a special needs child may qualify for the full amount of the adoption credit even if they paid few or no adoption-related expenses.

Filing for the credit. To claim the credit, taxpayers must file a paper tax return and attach Form 8839, Qualified Adoption Expenses. In addition, taxpayers must attach documents supporting the adoption. Documents may include a final adoption decree, placement agreement from an authorized agency, court documents, and the state’s determination for special needs children. Failure to include required documents will delay any refund.

Qualified adoption expenses are reasonable and necessary expenses directly related to the legal adoption of the child who is under age 18, or physically or mentally incapable of caring for himself or herself. These expenses may include adoption fees, court costs, attorney fees, and travel expenses.
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