Adoption Tax Credit 2014-2015

It’s time for our annual adoption tax credit show. If you had adoption expenses in 2014, can you get a federal tax credit for them? Is this tax credit applicable to foster care adoption, or international adoption, or infant adoption? Can you claim birth mother expenses? Host Dawn Davenport, Executive Director of Creating a Family, the national infertility & adoption education and support organization, interviewed Becky Wilmoth, an Enrolled Agent and Adoption Tax Credit Specialist® at Bills Tax Service, and a frequent speaker on this topic. We also have Josh Kroll, Adoption Tax Credit and Adoption Subsidy Coordinator at the North American Council on Adoptable Children (NACAC).

Hit the Highlights
  • Were there any changes to the Adoption Tax Credit for those claiming adoption expenses in 2014?
  • How much is the Adoption Tax Credit for 2014?
  • Is the adoption tax credit for adoptions in 2014 refundable or non-refundable and what is the difference? Let’s break it out by type of adoption: foster care adoption, domestic infant adoption, and international adoption.
  • What adoption expenses are eligible for this credit?
  • When can you claim these expenses?
  • How do you file for the adoption tax credit if you don’t have a social security number or Adoption Taxpayer Identification Number (ATIN) for your child?
  • What documentation is required to be submitted when claiming the adoption tax credit? Should you send originals or copies?
  • Is the adoption tax credit available to failed adoption matches where the adoptive family was matched with an expectant woman and incurred expenses, but she changed her mind after birth and decided to parent?
  • How is money coming in from donations or crowdfunding for adoption treated by the IRS, and how does it affect the adoption tax credit?
  • How does the adoption tax credit work for an adoption dissolution? Is the new family eligible?
  • What happens if your tax liability are less than the credit? How long can you carry over the adoption tax credit?
  • Is the credit applicable for:
    • Second parent adoptions of same sex couples?
    • Unmarried heterosexual couples?
    • Stepparent adoptions?
    • Embryo donation (also sometimes called embryo adoption)?
  • Have people been experiencing delays when filing for the adoption tax credit?
  • How will Senator Mary Landrieu’s absence from the Senate affect the viability of the Adoption Tax Credit?
  • What’s on the horizon for the adoption tax credit? How stable is it?
  • Will the adoption tax credit become refundable in 2015?

The Internal Revenue Service (IRS) has released the 2014 version of Form 8839 (Qualified Adoption Expenses), as well as updated instructions. Taxpayers use Form 8839 to claim: the adoption credit, an exclusion for employer-provided adoption benefits, or both. Changes to the 2014 form and instructions include the following:

  • The maximum adoption credit and exclusion amounts have been adjusted to reflect their 2014 values ($13,190 per eligible child).
  • The instructions regarding adoption of children with special needs have been revised.
  • The adoption credit carry-forward worksheet in the instructions for line 16, which identifies unused credits that taxpayers may carry forward to 2015, has been modified to reflect that there are now three years (2012–2014) for which a taxpayer might have carry-forward amounts.

The IRS website posted Bulletin 2014-47 on November 17 stating:

  • Adoption Credit. For taxable years beginning in 2015, under § 23(a)(3) the creditallowed for an adoption of a child with special needs is $13,400. For taxable years beginning in 2015, under § 23(b)(1) the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,400. The available adoption creditbegins to phase out under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $201,010 and is completely phased out for taxpayers with modified adjusted gross income of $241,010 or more. (See section 3.19 of this revenue procedure for the adjusted items relating to adoption assistance programs.)