Adoption Tax Credit

Two tax benefits are available to offset the expenses of adopting a child.

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Qualified adoption expenses

To qualify for the credit or the exclusion, the expenses must be "qualified adoption expenses."

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Eligible child

An "eligible child" is a child under the age of 18 at the time the qualified adoption expense is paid.

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Special needs child

This refers to a child who the state has determined cannot or should not be returned to his parents

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When to claim the credit or take the exclusion

If the qualifying expenses are paid before the year the adoption becomes final, the credit is claimed for the year after the one in which the expenses are paid.

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Phase-out for high-income taxpayers

The credit allowable for 2008 is phased out for taxpayers with adjusted gross income (AGI) over $174,730 and is eliminated when AGI reaches $214,730.

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How to claim the credit or take the exclusion for qualified adoption expenses

Adoptive parents who paid qualified adoption expenses or who received employer-provided adoption benefits must use Form 8839 to compute the amount of the credit and the amount of benefits that may be excluded from their gross income.

Child's taxpayer identification number required for credit or exclusion

IRS can disallow the credit and the exclusion if a valid taxpayer identification number (TIN) for the child is not included on the return.

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Adopted child may qualify for dependency deduction, other tax benefits

Your legally adopted child will qualify as your dependent if the other dependency tests are met, e.g., you provide more than half of the child's support.

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RAISING MONEY OTHER WAYS

  • Most banks give home equity loans for adoptions
  • Some families ask family members to give donations
  • Fund-raising activities like golf-tournaments, garage sales, etc have been used to fund the adoptions
  • Borrow from a 401K
  • Contact Airlines requesting a reduced rate for adoption
  • Check with hotels for adoption rates

Websites

www.gotchagiftregistry.com

Create a personalized webpage where friends and relatives can contribute to agency fees, medical costs, travel funds, and more. 

"How to Make Adoption an Affordable Option"
www.nefe.org
A comprehensive booklet, published by the National Endowment For Financial Education. Available free of charge from the
Consumer Information Center
Pueblo, CO 81009
Booklet also available on internet web site: www.pueblo.gsa.gov 

www.myregistry.com
Register baby gifts and request monetary donations to fund your adoption.

Additional information