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After talking with my accountant he is under the impression that any expenses paid for the birth parent are not qualified tax credits. Our adoption attorney set up a trust/escrow to cover expenses such as rent pn etc. After reading through this forum some and then reading what form 8839 says along with it's instructions there really is no clear definition to me when it comes to those expenses.
Anyone have any light to shed on this?
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Birth parent expenses are part of adoption expenses and can be included in the amount for your tax credit. Keep good records of how you paid them and be able to provide proof of payment and what they were for.
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Birth parent expenses are allowed by law in many states and are usually a condition of the adoption process. Basically any expense you incur because of the fact that you are adopting the child as opposed to having it yourself physically is an eligible expense. Just document it.
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I think your accountant is wrong. From everything I've read over the years about the adoption tax credit, all legally allowable "birthmother expenses" are included as eligible adoption expenses. If this is NOT the case, a lot of people sure are going to get nervous about the possibility of being audited. I don't think you have anything to worry about in terms of the ATC.
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I've always heard that birthparent expenses are NOT included in the tax credit. It's basically just for your actual adoption expenses like lawyers, travel costs, etc.. Not for rent, medical, cell phones, etc. as they are NOT required to do an adoption. It's a choice made by the adoptive parent on whether to fund it or not.
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