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November 24, 2010


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I received this credit a couple of years back after my spouse and I adopted a child from another country. I assumed the requirement that the international adoption be finalized was related to the greater possibility of fraud with international adoptions--ie, the difficulty of the IRS investigating a failed international adoption. But maybe I'm wrong.

Tim Zinnecker

"Over-simply stated, a tax credit is available for expenses related to an international adoption only if the adoption becomes final, but the same finality rule does not apply to expenses for a U.S. adoption."

My wife and I participated in a domestic adoption within the last few years. We could not claim the tax credit in the year of expenditure, but instead had to wait until a court finalized the adoption (which was in a different tax year). So I wonder if the quoted language might be wrong? Or maybe the tax laws changed in recent years? Or perhaps I misunderstood the eligibility of the tax credit?

Bridget Crawford

The law in this area is interesting (and complicated)! The instructions for Form 8839 (Qualified Adoption Expenses) are clear: "If the eligible child is not a U.S. citizen or resident, you cannot take the adoption credit or exclusion unless the adoption becomes final." In contrast, "[i]f the eligible child
is a U.S. citizen or resident, you can take the adoption credit or exclusion even if the adoption never became final." Curious. I think anonprof makes a good point about the anti-Madonna aspects of the law. If expenses relating to international adoptions gave rise to a tax benefit without regard to finality, it would be too easy to deduct leisure-based travel to international destinations, as long as the itinerary included a quick trip to the orphanage (or not). With respect to domestic adoptions, the law might be less insistent on finality because of lower barriers to audit.

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