The adoption credit is a credit of up to $13,400 for qualifying expenses paid to adopt an eligible child. The credit may be allowed for adoption of a special needs child even if you have no qualifying expenses. Qualifying expenses include:
- Adoption fees
- Court Costs
- Attorney fees
- Traveling expenses
- Re-adoption expenses to adopt a foreign child.
You may not take a credit for the following expenses:
- Those that violate federal law
- Related to surrogate parenting arrangements
- For the adoption of your spouse's child
- For which you received funds under any federal, state, or local program
- Allowed as a credit or deduction under any other federal income tax rule
- Paid or reimbursed by your employer or other person or organization.
An eligible child is an individual who is:
- Under 18 years of age, or
- Physically or mentally incapable of caring for himself or herself.
A special needs child is one who is an eligible child and meets all three of the following criteria:
- Is a citizen or resident of the United States
- A state determines that the child cannot or should not be returned to his/her parents' home
- The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. This decision is made considering
- The age of the child
- The child's ethnic background
- If the child is a member of a minority or sibling group
- If the child has a medical condition or physical, mental, or emotional handicap.
Generally, until the adoption becomes final you can take the credit in the year after the qualified expenses are paid or incurred. When final, you can take a credit in that year for any eligible expenses not previously deducted. You cannot take any expenses for the adoption of a foreign child until the adoption is final.
The amount of the credit is calculated on Form 8839