- Expenses connected with a foreign adoption (the child was not a U.S. citizen or resident at the time the adoption process began) qualify ONLY if and when the adoption is finalized. This is the same for any employer provided assistance programs. You must take the exclusion from income only in the year that the adoption is final. Any payments made to you or on your behalf after the year of the finalized adoption may be excluded from income in that year.
- To claim the credit, you must prepare a paper tax return and complete Form 8839, Qualified Adoption Expenses. The form must be attached to your income tax return, along with the required documentation, and mailed it to the IRS location that applies to your state.
- The required documentation for a U.S. citizen or resident child may include a final adoption decree, placement agreement from an authorized agency, court documents and the state’s determination for special needs children, depending on the whether the adoption was finalized and whether the child has special needs.
- For a foreign adoption governed by the Hague Convention and finalized in another country, you will need the Hague Adoption Certificate, the IH-3 visa, or a foreign adoption decree (showing the official seal) translated in English. For adoption in a country that is not party to the Hague Convention, you will need a foreign adoption decree (with the official seal) translated into English and IR-2 or IR-3 visa. Without the required documentation, the processing of your return will be delayed and you will more than likely receive a notice from the IRS.
There are so many additional rules that apply to foreign and special needs adoptions, as well as adoptions that are not final. It is always recommended that you seek the services of a tax professional to make the process flow accurately and timely.
Pamela Smitson, CPA
Smitson Erhart-Graves Tax Advisors, LLC
Pamela Smitson is a Certified Public Accountant who specializes in small business and individual taxation, tax planning, and financial planning services in Central Indiana.
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