Tax Benefits

Hope for Families is not a tax advisor and we recommend that you consult professional financial advice to determine how the following tax benefits could apply in your situation.

Federal Adoption Tax Credit:
The federal government now offers an adoption tax credit of $14,840 for 2019 to all adoptive families on qualifying expenses paid for a child’s adoption. This tax credit is more valuable than a tax deduction because allowable expenses are subtracted dollar for dollar against your tax liability. Please use IRS Form #8839 – Qualified Adoption Expenses.

Dependency Exemption:
Adoptive parents may take the same dependency exemption on their income taxes for their adopted children, and children placed with them for adoption but not yet finalized, as they would for their biological children. The exemption reduces their taxable income. The amount of the dependent exemption is adjusted annually to reflect the cost of living. The main point to remember is that families must provide more than half of their children’s support to list them as exemptions. Some adopted children come with subsidies, which may provide more than half of their support. For example, if a child receives $5,000 a year in subsidies, the adoptive family must provide $5,001 or more a year to claim the child as an exemption.

State Tax Credit/Adoption Subsidies:
Many states offer a tax credit or subsidy in addition to the federal tax credit. Ask your tax preparer about possible tax credits and/or tax deductions available to you from the state in which you are residing. See if your state of residence provides subsidies for special needs adoption from abroad. You can also ask your home study representative or a social worker about possible credits given by your state.