Adoption Tax Credit

Families who have adopted a child with special needs from foster care may be eligible to claim a federal adoption tax credit for qualified adoption expenses. 

Qualified adoption expenses, according to the Internal Revenue Service, may include:

  • Reasonable and necessary adoption fees
  • Court costs and attorney fees
  • Traveling expenses (including amounts spent for meals and lodging while away from home)
  • Other expenses that are directly related to and for the principal purpose of the legal adoption of an eligible child

From the Internal Revenue Service website, a child has special needs for the purposes of adoption expenses if:

  • The child is a citizen or resident of the United States or its possessions when the adoption effort began
  • A state determines that the child cannot or should not be returned to his or her parent's home
  • The state determines that the child probably will not be adoptable without assistance provided to the adoptive family

Do not confuse "children with special needs" for purposes of the adoption credit with the definitions of "children with special needs" for other purposes. Foreign children are not considered to have special needs for purposes of the adoption credit. Even U.S. children who have disabilities may not have special needs for purposes of the adoption credit. Generally, "special needs adoptions" are the adoptions of children whom the state's child welfare agency considers difficult to place for adoption."

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