[emmaalso]

Well this is all very helpful, I think , lol

We just had a failed adoption

I had custody of the baby for 9 days and the birthmother revoked consent on day 10 and I gave her back the baby. It was very difficult and we are out about $9,000

$4,000 attorney
$500 hotel
$350 car
$1,500 adoption agency
$ 50.00 diapers, formular
$2,000 birthmother expenses

Are these all qualitifed expenses?

THis all happened in March of 2007

When can I file? and what form can I use?

THANKS FOR YOU HELP I am still recovering from giving up this sweet baby I took care of for 9 whole days.

[NYCgaycouple]

Hi Emma

first of all sorry for the failed placement you experienced. It must be so hard. We had a failed placement last year, though we never got to see the baby, I can't even imagine how hard it would be after 9 days ...

anyway. If this happened this month, I think you can claim the tax credit next year when you file your 2007 taxes. I think all those expenses are qualified ones.

Our placement failed in 2006, so I am claiming the credit this year. I haven't submitted my taxes yet (procrastinator here!) but I hope to get my $10,960 back!

[punch1]

I was just reading through the treads because I had a few questions of my own. There is some very misleading information in some of the posts. For one, you can NOT claim the adoption tax credit on a failed INTERNATIONAL adoption. You can on a failed domestic adoption however.

Just trying to clear the air.

Pat

[NYCgaycouple]

Since this has been discussed before I just wanted to confirm that I did get the tax credit for the failed adoption we had in 2006. The money came in today!

Pat is right btw. Only domestic failed adoptions qualify.

[emmaalso]

Can anyone clarify?

My agency states that i can only apply for th eloss IF we dont plan to ever adopt again...

This doesnt seem right although she seems pretty sure of hersefl. She stated people had taken advantage of this and now they only accepted on time filing for failed or successful adoption.

That is the first time I have heard that...

[NYCgaycouple]

this is the major sticky point as the IRS instructions for the tax credit form are somewhat confusing.

My interpretation is the following. You can only claim one credit per "attempt". So the point is: if you have a failure and then a successfull one, is that one attempt or two. In any case, you can still get the credit for the failed one, though it may compromise getting it later when you have a successfull one. Even if that's the case, I would still get my money as soon as possible.

But many people in this board have claimed the credit for a failed placement, and then received it also for the successfull one.

My suggestion, and again we are talking about your 2007 taxes, is to go ahead and claim it. And then see what happens when you have a successfull one.

[gabesmom04]

hi we had a failed adoption also. we had the little girl for 3 weeks in MI. (one of the worse states to try to adopt in) our tax attorney was able to deduct our expenses for that adoption. we got the full 10,000 for our adoption that did finalize, plus a credit for the next years taxes.. because we could not take another credit for the same year with the failed adoption. not sure how it was done. but i do not think it is "trying to get something for nothing" when you are trying to recover from a loss.
we live in FL
Michelle

[ZanesDad]

Originally Posted by NYCgaycouple

this is the major sticky point as the IRS instructions for the tax credit form are somewhat confusing.

My interpretation is the following. You can only claim one credit per "attempt". So the point is: if you have a failure and then a successful one, is that one attempt or two. In any case, you can still get the credit for the failed one, though it may compromise getting it later when you have a successful one. Even if that's the case, I would still get my money as soon as possible.

But many people in this board have claimed the credit for a failed placement, and then received it also for the successful one.

Yep, this issue hasn't been easy to understand at all (and I'm a CPA who studied tax law!)

The actual law enacted by Congress (Section 23 of the Internal Revenue Code) says there's a credit available per child adopted. It doesn't define what it means for an adoption to be final and it doesn't mention anything about the limitation of the credit when there are previous unsuccessful attempts to adopt a child.

The IRS is charged with writing regulations to interpret the law but it hasn't done so yet. They used to have Publication 968 but it was withdrawn in 2005 and hasn't been re-released. I know of one adoption attorney (AAAA) from Washington DC who says it was because the IRS no longer supported some of the positions it originally took in the publication. So currently, the only "official" guidance available from the IRS is Tax Topic 607 and the instructions to Form 8839.

Tax Topic 607 (Adoption Credit) says:

The dollar limit for a particular year must be reduced by the amount of qualifying expenses taken into account in previous years for the same adoption effort.

OK, so what does that mean? I think you can interpret it as meaning that if you try to adopt a child, fail, then adopt a different child, you can potentially have two credits.

The instructions for Form 8839 say:

If you made more than one attempt to adopt one eligible child, combine the amounts you spent and complete only the "Child 1" line. Do not report the additional attempt(s) on the "Child 2" line. Complete the "Child 2" line only if you adopted or tried to adopt two eligible children.

Example. You planned to adopt one child. You had one
unsuccessful attempt to adopt a child and later successfully adopted a different child. Complete only the "Child 1" line because you made more than one attempt to adopt one eligible child.

This is more in line with what the IRS said in Publication 968, but both AAAA attorneys I've talked to said this logic is nonsensical, and I tend to agree. Also, according to the attorney in DC, this position doesn't have any support in the statute or the legislative history. I did find a brief mention of it one time in my own research, but that was back in 1995 (before the credit was expanded).

Now, when do you claim the expenses for a failed adoption? This is what the law says:

(2) Year credit allowed
The credit under paragraph (1) with respect to any expense shall be allowed—
(A) in the case of any expense paid or incurred before the taxable year in which such adoption becomes final, for the taxable year following the taxable year during which such expense is paid or incurred, and
(B) in the case of an expense paid or incurred during or after the taxable year in which such adoption becomes final, for the taxable year in which such expense is paid or incurred.

So, when is a failed adoption final? If the answer is "never", then you would claim the expense in the year following the year you paid it. If the answer is that the adoption is final in the year of the failure (because the process is over at that point), then you claim the expense in the year you paid it. No clear answer.

In our personal situation, we started the adoption process in 2006 with a domestic agency and paid a portion of their fee. In August 2006 we were contacted by a friend of ours in Virginia who is a midwife. She had a client who had just given birth and wanted to put the baby up for adoption. We spoke with the birthmom, traveled to Virginia, hired an attorney, and took the baby home from the hospital to our friend's house to wait on the ICPC issues to be ironed out. Then two days later the birthmom decided to place the baby with a different family, so we went back home empty handed.

Later in 2006 we were matched through our agency with a pregnant woman whom we worked with until her child was born in March of this year and he was placed with us. We will finalize his adoption next month (parental rights are already terminated).

So, for our 2007 taxes, we plan to claim two credits: one for the failed adoption in 2006 and one for the finalized adoption in 2007. For the 2006 attempt, we'll only claim the expenses related to our trip to Virginia and the attorney there (total is less than the limit). For our 2007 finalized adoption, we'll claim the limit (the agency fees alone were more than the limit).

And we'll wait and see what happens. I almost hope they challenge us - I'd love to go to court on this, maybe get a ruling named after me.

Cheers!
Frank

[ContactChar]

Frank,

If you're still out there. . . do you use an accountant for your taxes or do your own? My accountant takes the more conservative approach, but could (I think) be persuaded otherwise. Do you know of an accountant in the DC area who takes your approach? Please pm me.

Thanks,

Char

[Carlyone]

We have been trying to adopt from Russia since 2005. We acutally made it to Russia this year and the adoption failed. Like everyone else, we have spent a fortune in trying to become parents. We are now at a point that we've exhausted our financial resources. Does anyone have any info on tax write-offs for failed international adoption? We can only find info for failed domestic adoption. We're not sure why there is a difference on this? Any guidance will be greatly appreciated.
Thanks!
-Carly

[nellybelly27]

Originally Posted by wdean20

Last year I started a thread here on how the adoption tax credit can be used on a failed adoption. I recieved many replies to my thread some helpful, some not, a few were insultive. Some people were affended that I would even think about claiming a credit for a failed adoption when I have no baby to care for. They thought I was trying to get something for nothing. However, the pain and anguishment that my wife and I have been through is enormous. With that being said I would like to address those who may have a similar situation by saying that YES you can claim this credit. I have the IRS check to prove it. If you are in this situation and would like to know more please respond to this thread. I will be happy to help you with the specifics.

Thank you for writing this info. We just barely had a failed adoption and are heartbroken. We went to another state and were there for the birth--but the birthmom changed her mind before time to sign. We've lost over $8,000. She was never placed in our home, though. Can we still claim a credit? Can someone help us. Thanks.

[Robyn7135]

Anyone using TurboTax to figure out their failed adoptions? We had two this past year and lost about $5000 and once I put everything in it tells me that we don't qualify for the tax credit. What the hell is that about? Our attorney said we'd be able to claim all of this. Any of you experience something similar?

[DianeS]

Robyn - what year were your expenses paid? Without a finalized adoption, you have to wait a year before you can claim adoption expenses.

So if your expenses were paid in 2007, you have to wait until you do your 2008 taxes to claim them. If the expenses were paid in 2006, you can claim them this year.

[Robyn7135]

This all happened in 2007. I guess DH and I are just confused b/c our attorney told us to save all our receipts b/c we could get some of our expense returned through the tax credit. But you're saying that even in failed adoptions we have to wait a year before we can claim the expenses? I'm not sure that makes sense, but we are talking about the IRS here.

[DianeS]

Originally Posted by Robyn7135

This all happened in 2007. I guess DH and I are just confused b/c our attorney told us to save all our receipts b/c we could get some of our expense returned through the tax credit. But you're saying that even in failed adoptions we have to wait a year before we can claim the expenses? I'm not sure that makes sense, but we are talking about the IRS here.

Yes, that's exactly right. You will be able to claim those expenses, but not until next year.

It's confusing, because if you had finalized that adoption, you could have claimed the expenses this year. The same expense, for the same thing, paid at the same time - but whether or not you finalize an adoption makes the difference on whether you can claim it this year or next year.