Adoption Tax Credit – Filing Your Federal Income Tax Return

With the approach of tax season, I’ve been asked several questions about the adoption tax credit. These answers may be helpful to you. Please feel free to give me (Les Gallagher) a phone call at 703-891-3282 or email me if you have any questions. You may also want to consult with a tax advisor.

• Adoption tax credit form: You will complete Form 8839 to claim an adoption tax credit. For more information please read IRS Topic 607- Adoption Tax Credit and Instructions for Form 8839 – Qualified Adoption Expenses.

• Documenting adoption costs: Your cancelled checks and credit card statements are the documents you’ll need in order to substantiate the deduction amounts shown in your income tax return, although you won’t include these with your tax return.

• Adoption order or decree: You will need to attach a copy of your adoption order or decree to your completed Form 8839. The adoption tax credit can be claimed in the year that your adoption is finalized.

• Adoption tax credit amount: The adoption tax credit for 2013 is 12,970 per child. A tax credit means that qualified adoption expenses will reduce your Federal income tax liability up to the entire amount of your income tax liability. Adoption tax credit amounts that remain unused can be carried forward to reduce Federal income tax liability in subsequent years.

• Social Security number: Each child is required to have a social security number in order to qualify for the adoption tax credit.

• Special needs adoption: A special needs adoption is one in which the state or county child welfare agency has determined that the child is not likely to be adopted unless the government provides assistance to the adoptive family.

• Grants and donations: You will not include grants received from granting agencies or donations received from family and friends through the Eternal Family Program in your income. Likewise, adoption costs offset by grants and donations will be excluded from your qualified adoption costs in claiming the adoption tax credit.

-Les Gallagher, CFO

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