Adoption tax credit changes

One of the things that makes adoption more affordable for families is the adoption tax credit from the U.S. government. (That credit was $12,150 for adoptions finalized in 2009). In past years, that credit was non-refundable.  In 2010, for the first time it is a refundable credit. That’s great news for adoptive families with moderate income and/or low tax liability.

What does this mean?

In the past the adoption credit simply offset any tax liability you had for the year.  For example, if line 44 of your 1040 showed you owing $4200, and you finalized an adoption that year, you would be able to claim $4200 of your adoption credit that year, and not have to pay that $4200 in taxes. (That example is slightly simplified– other factors can come into play too.) But in general any remaining adoption credit ‘carried forward’ for up to 5 years, working to offset future year’s taxes.  If you ended up not having enough tax liability to use up the adoption credit in 5 years, too bad.  It was gone.

In 2010 for the first time that credit is refundable, which means families can now claim it in one lump sum on 2010 taxes EVEN IF their total tax liability is less than the adoption credit.

But here’s where the news gets really great!  This change also applies to families who finalized adoptions as long ago as 2005  and who still have adoption tax credit carryforward. (Wondering how much adoption credit carryforward you have?  Look on line 23 of your last year’s 8839.) 

Now– disclaimer — I am not a tax expert.  Talk to your tax consultant to see how these new rules apply to your family.  And by all means, weigh in below if your knowledge of this goes deeper than mine.

Right now I am looking our 8839 and am hardly daring to hope to see all that money next year.  (New kitchen floor, get outta my mind!)  But if this works as my homestudy agency and the sources below explain, this is excellent news for many moderate-income adoptive families.

Where I got my info:

Adoption tax credit

Enhanced adoption credit in 2010

When are foreign adoptions considered final?


  1. Isn’t it amazing how God provides when you follow his leading? I will share this info with a couple friends who are hoping to finalize adoptions in 2010 or 2011 – thanks! 🙂

  2. Seriously???? That is HUGE. I’ve been asking everyone if it would apply to previous years and no one has been able to tell me and everyone assumed no.

    That’s like $18,000 we should get back! (Two kids and we’ve only been able to claim like $5k so far.)

    Lady, you just made my week!!!!

  3. It’s all true! I checked with the IRS myself – a real live person who called herself the adoption tax “guru” 🙂

    So, so excited!

  4. We’re excited but need to find out what documentation we need to show our special needs foster adoption.

  5. This is wonderful news! For us, we have been able to get all of our credit in previous years, so we don’t have any credit carried forward right now, but I was worried that this year we wouldn’t get it all because we really changed how we do our withholding last year.


  6. Hi there: I am a Canadian adoptive parent, but this is of interest to my American adoptive parents who are friends and readers. I also blog about adoption and speak about it too. I have shared this on my facebook profile as it is important info. I am working up a conference proposal for NACAC on this topic for Canadians. I wonder if you or someone else who is informed about this – for US details – might consider discussing this further with me so I have more US details to share at the conference next year. Thanks, Paula Schuck

  7. I was so excited to see your post as we are in the process of adoptiong now (although it won’t be finalized til next year) and was just wondering how that worked. Thank you!

  8. We will be finalizing the adoption of our 2 boys soon. (We came home in May) Our adoption cost us $26,000 total after travel. That’s how much we will get back. God sure has provided.

  9. Quick question. We have not adopted but would like to in the future. For people, like us, who usually do not owe money but get money back does the adoption tax credit help us at all?

    • Yes,that is the essence of the change this year — that you don’t even have to have that much tax liability to get the adoption credit. Up til now, the adoption credit has only been a small help to our family, since with our large family and moderate income we have such little tax liability.
      The new changes will really make adoption more affordable for moderate income families!

  10. This sounds great, but I have one question…
    We adopted from Korea in 2007 and our daughter was finalized in 2008. However, we were given info. that we couldn’t apply for the tax credit until she got her Certificate of Citizenship and SS#. We finally got all that done in 2010. We NEVER did apply for the adoption tax credit and plan on doing that now.
    So, do you know how this will work for us? Should we expect to get one BIG, lump sum?
    Oh my goodness if this happens we will be completely debt free!

  11. We were a family that was audited and I gave them every translated piece of information from Ethiopia I had, along with a detailed explanation, receipts, and duplicate checks for all expenses. I have yet to see the refund. They told me 30 days from 4/26 when I called, then I got a letter dated 5/9 that stated 30 days from that date. Has anybody actually received the refund that has been audited yet?

    • Hi Dana,
      I have yet to hear from anyone who got the refund…that would sure be good news!

      • I talked to IRS yesterday. They said our file is complete/closed and our refund is on the way.

        • That would be wonderful Dana – we are on about the same timeline 🙂

          • I got a letter in the mail today (AFTER speaking with a person that said our audit was complete this past Friday), stating that we should hear something from them by JULY 2nd. Every pc of correspondence bumps the date out another month. How difficult can it be? They claim to have had all our audit materials since 4/17.

        • Two days ago we got a letter in the mail saying they had what they needed and we should hear something within 30 days….crossing fingers.

          • I called them today to find out what pc of information is correct. Letters? Websites? Person to person? The guy on the phone said our refund should be in our account by Friday. We’ll see…

  12. rebecca says:

    Has anyone received this yet, or heard of anyone who has? We filed in February, then got a letter in April asking for more info, so we called and were told the IRS had lost our paperwork- really. So, we faxed it in in April, then got another letter saying we would hear from them in 30 days. In 30 days on the nose we got another letter saying it would be 30 days, again. That 30 days is up on June 21. I had called in May and was told they were working on the ones filed in mid March, and that I had been moved to the back of the line since I had to resend paperwork. This is all sounding a little fishy. It would be great to hear someone actually got this. Oh- our adoption was thru the state, special needs- no need for extra paperwork, just prove of adoption of a special needs child form our state. how hard can that be to verify? One call to the court house?


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