Written by Marc R Barnes EA
May 14, 2012

Finalize your adoption in 2012...or else (updated)

Those who have gone through or are going through the adoption process know only too well how long it takes and how expensive the process is. According to the 2011 Adoptive Family Survey, adoptions can range in cost from $7,000 to over $50,000!


The adoption credit was introduced in the mid 90s as a flat $5,000 credit, over the years it has changed:

Credit Amount
Refundable Credit?
($6,000 special needs)
Carryforward of unused credit
Yes, Refundable even if no tax owed
Yes, refundable even if no tax owed
Down $710 vs 2011
2013 ??
Made permanent in "fiscal cliff" legislation

To Receive the Credit

To ensure you receive your adoption credit you must comply with the requirements for the credit. While there are a number of details, here are some key points to remember;

  1. To qualify for the credit your adoption must be finalized. Proof of finalized adoption may include a final adoption decree, placement agreement from an authorized agency, court documents and the state's determination for special needs children.
  2. A qualifying child must be age 18 or younger or be a qualified special needs dependent
  3. Qualifying expenses per the IRS are:
    "... reasonable and necessary expenses directly related to the legal adoption of the child. These expenses may include adoption fees, court costs, attorney fees and travel expenses..."
  4. Your employer might also provide up to $5,000 in adoption expense reimbursement. This benefit can be taken in addition to the adoption credit, but not for the same expenses.
  5. If your income exceeds $194,580 the credit phases out until it is completely gone when your income exceeds $234,580. (updated for 2013)

Action to take now

  1. Keep things moving. If you are currently adopting make sure your process is constantly moving forward. Press your agency to schedule timely home visits. Review the list of needed information and get on it right away. Even driving forms to your agency versus mailing them saves time.
  2. Play hand off. The adoption process can be grueling. Be prepared to take the baton from your partner if they start to get overwhelmed or frustrated. Divide up the tasks. When one of you starts feeling bogged down by the process, be prepared to step in and help.
  3. Get in line. Often it is difficult to decide which adoption program makes the most sense for you and your family. Domestic or foreign? In state or out of state? Infant or waiting child? Only until you decide upon an agency and program that's right for you, can you make progress toward completion of a successful adoption.
  4. Talk to folks. If early in the process, talk to people who have gone through it to determine how long the process takes and review the experience they've had with your providers. Some programs take years, others not so long.
  5. Carry the ball. When you wait for an adoption agency or government department to get something done, you often feel helpless. Whenever possible, do not relinquish control over the adoption process.
  6. Talk to your representatives. Make sure your adoption agency, legal representatives and others are aware of the possible tax penalty you may face for not finalizing your adoption in 2012. Losing a $12,000+ credit can be a tremendous financial hardship for most families.

Is there good news? While there are no guarantees, there is hope that the current adoption credit will be made permanent. This program has been very popular in helping needy children find good homes and has broad support among politicians.


Topic: Marriage and Family