Don't Leave Money on the Table. Making the Most of the Adoption Tax Credit

When it comes to adoption, remember that this is an investment that you have made into the life of a child. To help make this affordable, don't leave any money on the table. The IRS allows you the opportunity to deduct the cost of your adoption up to $12,150.00 (as of 2009). This can be done over the course of five years. Here are some things you need to know.

Keep Good Records

Keep track of all your records and receipts. In the event of an audit, this will be substantiation for your deduction. Keeping a list of expenses is also beneficial if you are keeping an adoption journal (which I strongly recommend).

Information You Might Need

The information you need to claim the adoption credit is at the IRS website. That website is linked in this blog. Familiarize yourself with the rules for Form 8839. This will tell you what expenses are considered qualified and walk you through submitting this form in order to claim the credit. I would suggest seeing a tax professional if you have never taken this credit before.

Forms you will need

Form 8839
Form 1040 or Form 1040A
Form W-7A (if your child does not have a SS#)


Other Facts

• The tax credit applies to domestic and international adoptions, but the procedure is not the same. Credit for expenses for international adoptions can be claimed only after finalization; for domestic adoptions, the credit can be applied even if the adoption does not go through.
• The full credit can be taken for domestic special needs adoption even when the qualifying expenses don't reach that limit.

The Adoption Credit can be a very valuable resource. However, it is also one of the most complicated credits to take. There are some good tax software programs that can walk you through this credit. I filed Form 8839 for the first time using Tax Act, but I also am a tax preparer. You may need the assistance of a tax professional. The benefit of this credit is well worth the expense.