Adoption Tax Credit

Adoption fees and expenses can run up a final total of over $40,000, which is no small sum to part with, especially while starting a family. However, one of the benefits of adoption is that adopters can claim the fees on their taxes and receive at least a third of their adoption fees back in their tax refunds.

The adoption tax credit is a refundable credit that adoptive parents can claim on their taxes. In 2010, the maximum credit amount was $13,170, regardless of the adoptee's special needs and health.

To qualify for the adoption tax credit, an adopter must have out-of-pocket expenses from the adoption of a child that is under 18 years old. These expenses are calculated using IRS Form 8839.

Qualified expenses include adoption fees, court costs, attorney fees, travel expenses and re-adoption expenses for international adoptions. The tax credit does not apply to surrogate expenses, the adoption of a spouse's children, expenses that have already been reimbursed or paid for by federal, state, or local programs, or those paid before 1997.

The adoption tax credit cannot be taken until the adoption is finalized and sometimes may not be claimed until the year after an adopter qualifies for the credit. This is particularly important for international adoptions, because those fees cannot be reimbursed until the child has a visa and the adoption is finalized.

To process the tax credit, the Form 8839 will need to be attached to Form 1040. The credit will be entered on line 52 on Form 1040 with "box b" checked off.