202 Adoption Credit

When it comes to adoption, the tax code has provisions in it to help you recover some of the costs associated with an qualified adoption.

The 2017 adoption credit is $13,570. The adoption credit phaseout begins at $203,540 and completely phases out at $243,540.

The adoption credit is not available for the taxpayers filing as married filing separately.

The adoption credit is a non-refundable credit and may be carried forward for five years if the credit can be fully used in the first year. Qualified expenses for adoption credit:

1. Must be reasonable and necessary adoption fees and expenses
2. Court cost and attorney fees
3. Traveling expenses including lodging and meals
4. Other expenses that are directly related and for the purpose of the adoption

An eligible child for adoption and qualified expenses are defined as
1. An individual under the age of 18 or is physically and mental incapable of self-care
2. Don’t include expenses that taxpayer pays to adopt the child of the taxpayer’s spouse.
3. Expenses paid by a registered domestic partner who lives in a state that allows same-sex second parent or co-parent to adopt his or her partner’s child, as long as those expenses otherwise qualify for the credit.

You can claim the adoption credit on a tax return for
Domestic adoption is the adoption of a U.S. child (a citizen or resident of the U.S. or its possessions before the adoption effort begins). Qualified adoption expenses that are paid before the year that the adoption becomes final are can be claimed as a credit for the tax year following the year of payment (even if the adoption is never finalized and even if an eligible child was never identified).

Foreign adoption is the adoption of an eligible child who isn’t yet a citizen or resident of the U.S. or its possessions before the adoption effort begins. Qualified adoption expenses paid before and during the year can be claimed as a credit for the year when the adoption becomes final.

When the adoption becomes final, and under the limitation, qualified adoption expenses paid during or after the final year can be claimed as a credit for the year of payment, regardless whether the adoption is foreign or domestic.

As a result of the timing rules, qualified adoption expenses that are allowable in the current year could include expenses paid in the previous year(s).

The Form 8839 Instructions, Form 8839, and the adoption credit information can be found here.

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