You have most likely heard about the ADOPTION TAX CREDIT. Most people are advised to claim the credit the year they finalize an adoption, but you can also claim the credit for unsuccessful adoptions. I have asked my colleague, Becky Wilmouth, an Adoption tax Credit Specialist to explain:
Claiming the adoption tax credit after a failed adoption!
Not all adoption attempts end in a successful adoption. There are many failed or incomplete domestic adoptions. Many families who have had a failed or incomplete adoption are often told they do not qualify for the Adoption Tax Credit. You may still be eligible for the credit. The rules of when and how to file are different when you have a failed or incomplete adoption. The maximum amount of the adoption tax credit for 2017 is $13,570. The income phase-out range is $203,540-$243,540.
The adoption attempt must be for a domestic adoption only. It does not apply to international adoptions. You as the taxpayer may apply for the adoption tax credit the following tax year after the expenses were paid. You basically have to wait a year. So for example, if you paid expenses in 2016 and the adoption failed, you would not be able to claim them until you do your 2017 tax return at the beginning of 2018.
The tax return will not be able to be electronically filed, because you do not have a social security number for the child you are claiming the credit for. The Form 8839 is the form used for all adoptions claiming the Adoption Tax Credit. You will need to have a detailed invoice or statement from your agency or lawyer showing the paid expenses. I recommend you attach that to the paper return.
If you have a successful adoption after the failed adoption, the amount you received for the failed adoption will go against the amount you will receive on the successful adoption. You can also combine all expenses from the failed and successful adoption and claim it as one adoption. Once you have a failed adoption and then a successful adoption the process will then start over.
Becky Wilmoth is an Enrolled Agent and Adoption Tax Credit Specialist® at Bills Tax Service. She is a member of National Foster Parent Association, National Council for Adoption/Adoption League, North American Council on Adoptable Children, Kaskaskia College Business/Accounting Advisory Board, National Association of Enrolled Agents, National Association of Tax Professionals, and Illinois Society of Enrolled Agents. She is a guest writer and guest speaker at national adoption conferences, webinars, internet radio, blogs, and podcasts. Bills Tax Service is a member of Christian Alliance for Orphans. Many at Bills Tax Service have been blessed by adoption! She can be reached at www.billstaxservice.com firstname.lastname@example.org 1-888-7ADOPT0 should you have additional questions.