If you paid qualified adoption expenses or finalized an adoption during 2015, you may be eligible for an adoption tax credit.
If your employer provided adoption assistance, you may be able to claim an exclusion from income. The maximum for each benefit, per child, for 2015 is $13,400.00. Individuals may be able to claim the tax credit as well as the income exclusion, but cannot claim a credit and an exclusion for the same adoption-related expense. Each benefit is subject to phase out for individuals at higher income levels per adoption.
An adoption tax credit is available if you paid qualified adoption expenses, which include home studies, attorney fees, court costs and travel expenses. The credit is available for domestic adoption expenses even if the adoption is never finalized. If you adopted a child identified by the state as having special needs (usually, a child placed in foster care) you can claim the tax credit even if you did not have qualified adoption expenses or incur any out of pocket costs to adopt the child. Having a tax credit means that the amount of the credit is subtracted from your overall tax liability. The tax credit is not refundable, which means you will not receive more than the amount of your tax liability for the year. However, any unused credit may be carried forward for up to 5 years.
The application of the tax credit can become complicated if you incurred costs or claimed a part of the credit prior to the year in which the adoption was finalized. Guidance and additional information is available through the IRS website as well as the Save the Adoption Tax Credit website.
heARTbeat is a publication of KingSpry’s Adoption Law and Assisted Reproductive Technology Law Practice Group. It is meant to be informational and does not constitute legal advice.
