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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 or send me an email if you have any questions. My phone number is 703-891-3282 and my email address is 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 amounts shown in your income tax return Form 8839 as deductions. 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 2012 is 12,650 per child, but is not refundable as it was in 2011 and 2010. 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. (Refundable means that qualified adoption expenses will be fully reimbursed up to the limit by the IRS regardless of the amount of your Federal income tax liability.) Adoption tax credit amounts that remain unused in any year 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, the adoption costs that the grants and donations were used to pay for will be excluded from your qualified adoption costs in claiming the adoption tax credit.


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