Adoption Credit

What is the adoption credit? If you adopted a child, began adoption proceedings, or tried unsuccessfully to adopt a child during the year, you might be eligible to receive a tax credit for your adoption expenses. If the adoption is finalized, you can take the adoption credit for expenses that occurred during 2009; otherwise, you take the credit only for expenses from 2008. Example: You had $3,000 in adoption expenses in 2008 and $4,500 in 2009. If the adoption is finalized, then you can claim all $7,500 in expenses toward the credit on your 2009 return. If the adoption wasn't finalized, then you can only claim expenses from the prior year, $3,000 from 2008 in this case. Do I qualify for the adoption credit? Eligibility requirements - Eligible expenses include: court costs, attorney fees, travel (including meals and lodging), and other expenses related to adopting a child. - An eligible child is a child under age 18. If the child turned 18 during the year, include only the expenses paid up to their 18th birthday. Individuals 18 or older are only eligible if they are mentally or physically incapable of self-care. - Your modified adjusted gross income must be less than $214,780. Note: If your filing status is married filing separately, then the child you are adopting must have lived with you for more than half of the tax year, and you must have provided more than half of his or her support. In addition, you must have lived apart from your spouse for the last six months of the tax year. Limitations of this credit - If you are adopting either a foreign child or a special needs child, you can take the credit only after the adoption process is finalized. - You cannot claim this credit if the child being adopted is your spouse's child. - If your employer or your spouse's employer reimburses your adoption expenses, then you cannot claim those expenses. - You can claim a maximum credit of $12,150 per child. - The credit is limited to the amount of taxes you owe on your return. That means if the credit is bigger than what you owe in taxes, the credit reduces your taxes to zero and you can carry forward the remaining credit to next year's return. You can carry forward the unused credit in your tax returns over the next five years or until you've used up the credit, whichever comes first. Example: If you owe $3,000 in taxes and you receive an adoption credit of $5,000, the credit reduces your tax to zero on this year's return and you can carry forward the remaining $2,000 credit to use on your next year's tax return. - If your adjusted gross income with certain adjustments (called your modified adjusted gross income) is over $174,730 and $214,730, then you receive only part of the credit. If it is over $214,730, you receive no adoption credit. Special circumstances or exceptions - If you have expenses from an unsuccessful adoption or one that was not final and you do not have all the information about the child, you might still be able to receive a tax credit for your expenses. If you don't have the child's identifying number or first and last name, you'll need to indicate the name and address of the agency or attorney who assisted in the attempted adoption. TurboTax prompts you for this information in the adoption portion of the Interview. What paperwork do I need for the adoption credit? - To claim this credit, you'll need Form 8839, Qualified Adoption Expenses. TurboTax helps you prepare this form. - You'll also need the qualifying child's Social Security number (SSN), adoption taxpayer identification number (ATIN), or individual taxpayer identification number (ITIN). - For your records, you need receipts showing your expenses related to the adoption.