Adoption Tax Credit: Disrupted Adoption

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By now, many of you may have learned that a successful placement and adoption of a minor, with the exception of step-parent adoptions, makes you eligible for a 14,000 federal (and in some states, some level of state) income adoption tax credit (in addition to any gross income deductions allowed). A credit reduces the amount of the tax; a deduction reduces the amount of income the tax will be based.

What If Our Placement Wasn't Successful?

But what if the placement is disrupted? As emotionally devastating as a disruption is, are prospective adoptive couples still eligible for such tax savings? The answer, thankfully, is YES!! At least for the federal credit, a failed placement (i.e., the child was never in the client’s custody) or disrupted placement (i.e., child was removed from the client’s custody) is still eligible for such adoption tax savings. But if the couple doesn’t have the child’s SSN, what do they do? A client asked: If I’m Trying to Claim the Credit for a Failed US Adoption, What Do I Use for the Child’s Identifying Number?

How Do We File Our Taxes?

Here’s the research!  There may be a couple of reasons you cannot give complete information about an eligible child you tried to adopt.  Either the adoption was unsuccessful or was not final by the end of the year.  If either of those apply, complete the entries that you can on line L of your 1040. Then enter “See Attached Statement” in the columns for which you do not have the data. Then attach a statement to your return, providing the name and address of any agency or agent (such as On Point Legal) that assisted in the attempted adoption. Be sure to write your name and social security number on the attached statement. Of course, OPL will happily provide you with a statement that confirms the status of the placement and the total money expended. For more information, consult the IRS and the NACAC.

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