by Debra Lobel

Created on: April 26, 2009

There are three different types of child related tax credits that one can take if they are eligible. One is a tax credit for child and dependant care. A second tax credit is the child tax credit. The third tax credit is the adoption credit. Tax credits reduce ones tax liability dollar for dollar.

A credit is given for the qualifying expenses that are paid to adopt a child that year. If some of the expenses for the adoption were paid the year before the adoption is finalized, those expenses can be credited, too. You cannot claim any expenses that was reimbursed or paid by your employer. You cannot take a credit for the adoption of a stepchild.

Qualifying expenses include adoption fees, court costs, attorney fees, and traveling expenses while not living at home. The child must be under eighteen years old or incapable of taking care of themselves, either physically or mentally. They must be citizens or residents of the United States unless the adoption is finalized.

The credit is limited to a dollar limit for the year. This adoption credit is $12,150 for 2009. This dollar limit is per child. You can take the credit if your adjusted gross income is less than $182,180 and phases out at $222,180. This credit is defined in the instructions for IRS form 8839.

For example, if your adjusted gross income $100,000 for 2009 and your adoption expenses are $10,000, and then you can take a credit for $10,000 since that is less than the dollar limit for 2009. If your adoption expenses are $15,000, then you can take a credit for $12,150.

Another example is if you paid $4000 last year and $5000 this year, then you can take a credit for $9000.

If your adjusted gross income is $250,000, you cannot take an adoption tax credit since your income is above $222,180.

To take the adoption credit, you need to fill out form 8839 and attach it to Form 1040 or Form 1040A. The credit is reported on line 52 of Form 1040 and line 34 of Form 1040A. You also need to fill out and attach Form SS-5 to apply for a Social Security Number or Form W-7 for an Individual Taxpayer ID Number if the child is a resident or non-resident alien. If you are in the process of adopting a United States or resident when you take the credit, then fill out and attach Form W-7A to apply for an Adoption Taxpayer ID Number.

I was able to use this tax credit after I adopted each of my sons. It is certainly a big help financially to be able to take a tax credit for adoption expenses.

Learn more about this author, Debra Lobel.
Click here to send this author comments or questions.