Taxpayers who adopt an eligible child may qualify for an adoption tax credit. Generally, a taxpayer may qualify for the adoption credit if they paid qualified expenses relating to the adoption of an eligible child. Form 8839 is used to calculate the allowable credit of an eligible child based on the taxpayer's qualified expenses.
Qualified Adoption Expenses
Qualified adoption expenses are reasonable and necessary expenses directly related to, and for the principal purpose of, the legal adoption of an eligible child.
Qualified adoption expenses include:
- Adoption fees
- Attorney fees
- Court costs
- Travel expenses (including meals and lodging) while away from home, and
- Re-adoption expenses relating to the adoption of a foreign child
Qualified adoption expenses do not include expenses:
- For which you received funds under any state, local, or federal program
- That violate state or federal law
- For carrying out a surrogate parenting arrangement
- For the adoption of your spouse's child
- Paid or reimbursed by your employer or any other person or organization, or
- Allowed as a credit or deduction under any other provision of federal income tax law
An eligible child is:
- Any child under age 18. If the child turned 18 during the year, the child is an eligible child for the part of the year he or she was under age 18.
- Any disabled individual physically or mentally unable to take care of himself or herself.
A child with special needs is defined as a U.S. citizen or resident determined by a state to be unlikely to be adopted unless adoption assistance is provided due to a child's age, ethnic background, medical condition, membership in a minority or sibling group, etc.
Is the adoption credit a refundable or nonrefundable credit?
The Adoption Credit is a nonrefundable credit, so the amount of the credit is limited to the taxpayer's tax liability for the year. However, any unused portion of the credit may be carried forward for up to five years.
Adopting a child who is a U.S. citizen or resident
- If qualifying expenses are paid in any year before the adoption becomes final, the adoption credit is taken the year after the year that the expenses were paid.
- If qualifying expenses are paid during the year that the adoption becomes final, the adoption credit is taken in the year the adoption was finalized.
- If qualifying expenses are paid in any year after the adoption is finalized, the adoption credit is taken the year the payment was made.
Adopting a foreign child
- If qualifying expenses are paid in any year before the adoption becomes final, the adoption credit is taken the year the adoption is finalized.
- If qualifying expenses are paid during the year that the adoption becomes final, the adoption credit is taken in the year the adoption was finalized.
- If qualifying expenses are paid in any year after the adoption is finalized, the adoption credit is taken the year the payment was made.
To fill out Form 8839 - Qualified Adoption Expenses in TaxSlayer ProWeb
From the Tax Return Summary page (Form 1040) select:
- Federal Section
- Deductions
- Credits
- Adoption Credit Form 8839
- Enter the eligible child's name, year of birth, identifying number (SSN or ATIN). Mark each box for the applicable other menu items.
- Enter the Qualified Adoption Expenses that were paid to adopt the eligible child in prior years and in the current year. If the adoption expenses were paid for a child with special needs and the adoption became final during the current year, enter the maximum exclusion amount for the current year.
- Enter Employer Provided Adoption Benefits received in prior years and in the current year. Mark the box if benefits were received in a prior year.
Note: This is a guide to entering information required on Form 8839 into the TaxSlayer Pro program. This is not intended as tax advice. For additional information, refer to the Additional Information links below.
Additional Information:
IRS Instructions for Form 8839 - Qualified Adoption Expenses
IRS Tax Topic - 607 - Adoption Credit and Adoption Assistance Programs