With tax season approaching, many adoptive parents or prospective adoptive parents may have questions about how their adoption affects their taxes, and what they are able to claim for the year.
We have good news: the IRS allows adoptive parents to claim qualified adoption expenses including adoption fees, court costs, travel expenses, and other expenses directly related to the adoption of a child. The maximum amount for the tax credit varies each year, but for 2021 is $14,440 per child. Visit the IRS website for the most updated information about the adoption tax credit.
In some instances, adoptive parents are eligible to claim their adoptive child as a dependent even if the adoption has not been finalized yet. In situations where adopting taxpayers are not able to obtain the child’s Social Security Number because the adoption is pending finalization, they may be able to apply for a temporary taxpayer identification number for the child, or an Adoption Taxpayer Identification Number (ATIN), to use on their tax return.
In order to apply for an ATIN, the adoption situation must meet certain requirements. Adoptive parents must be currently in the process of adopting a child, and the child must be legally placed in their home for legal adoption by an authorized adoption entity. The adoption must also be domestic, or foreign only if the child possesses a Permanent Resident Alien Card or Certificate of Citizenship, and adoptive parents must have made a reasonable effort to obtain the child’s social security number but they are unable to obtain it because the adoption has not been finalized. For more information on the adoption, temporary taxpayer identification number, and requirements to apply, visit the IRS’s Q&A page regarding the ATIN program.
Please note: we are not accountants and cannot give tax advice. Please consult with an accountant for specific financial and tax advising.