[marthavmommy]

I am being told that we can use the adoption credit since we adopted our daughter from foster care in August 2007, even though we really didnt incur expenses other than parking at the courthouse, and travel to the courtdates etc.

She is white, and was 19 months old at the time of her adoption. Does she qualify as 'special needs'? (Her Birthparents lost her because both were using drugs, and she may have had drugs in her system at birth).
Here is the tax guidelines...what do you think?

Use Form 8839 to figure the amount of your adoption credit and any employer-provided adoption benefits you can exclude from your income. You can claim both the credit and the exclusion for expenses of adopting an eligible child. But, you cannot claim both for the same expenses.
Adoption credit. Use Form 8839, Part II, to figure the amount of adoption credit you can take on Form 1040, line 54, or Form 1040NR, line 49. You may be able to take this credit if any of the following statements are true.

1. You paid qualified adoption expenses in:
   1. 2006 and the adoption was not final at the end of 2006, or
   2. 2007 and the adoption became final in or before 2007.
2. You adopted a child with special needs and the adoption became final in 2007. (In this case, you may be able to take the credit even if you did not pay any qualified adoption expenses.)

[xxsurroundedbyxy]

I believe your child would have to have been classified as "special needs" and it doesn't sound as though she would have qualified.

Kim

[DianeS]

The IRS will automatically accept the definition of the state that had custody of the child before you adopted her.

Every state has a set definition of "special needs", and you'll need to find the one for the state you adopted her from. In addition, some states allow children not pre-defined as special needs to receive some benefits (like subsidy or medical card), and if your child receives those she qualifies as "special needs" for the tax credit.

Good luck! If she qualifies as "special needs" according to her state, you qualify to receive the entire adoption tax credit - all approx. $11,000 of it. What a nice start to a college fund!

And remember, even if she does not qualify as "special needs" so you get the entire tax credit, you will be able to claim every item you spent a penny on as long as that item was required for you to adopt the child. So, any homestudy expenses, any training class expenses (even mileage), any saftey check expenses, any travel at all (like to visit her), any meal because you had to be somewhere and couldn't get home to eat, any parking fees, any court filing fees or document fees (like if you had to purchase your copy of the birth certificate), etc.

[bethy724]

In TX the "special needs" status would have had to be determined BEFORE the adoption. Good luck.

[marthavmommy]

Thanks Diane, I live in Florida and we do get the adoption subsidy, this also backs up what you are saying: (I found on the North American Council on Adoptable Children website:
NACAC | Post-Adoption Support )

How do I know if my child is considered to have special needs according to the IRS?
Children that are hard to place for adoption such as older children; minority children; sibling groups; and children with medical conditions, or physical, mental, and emotional handicaps often are determined to have special needs.
NACAC interprets the instructions for Form 8839 (the Adoption Tax Credit form) this way: If you receive adoption subsidy (assistance) for your child, the state that provides the subsidy has determined that your child has special needs. Your adoption subsidy agreement (or application and agreement) is the evidence that the state has determined your child to have special needs.
If your child does not receive an adoption subsidy, NACAC believes the state has not determined that your child has special needs and you will not be able to take the credit without documenting expenses for the cost of the adoption.

[Happy123]

I believe if you get a subsidy (AAP), that qualifies them for the tax credit. You could call up your adoption worker and ask if the child is considered special needs.
Good Luck,
Happy123

[ranoutofnames]

One of the adoption forms you would have signed states whether your child is Special Needs. I don't know what the form is called in your state but it has to exist because the IRS and State Tax Office asks for it if you are audited (I was audited for 2006 taxes).

In my state children adopted from foster care are pretty much always classified as Special Needs.

The tax laws from 2006 to 2007 didn't change in regards to adoption of special needs. I was able to claim the full amount for the child I adopted in 2006. I went through a tax audit and it was upheld. I had NO adoption expenses that I retained a receipt on to show proof nor did they ask me for any.

My audit was because I had an adoption in 2005 and 2006. My daughter was adopted on the last possible day in 2006, by the time I got her birth certificate and adoption decree to SSA to get her name change there was a crossing of information that triggered her not to exits. The tax auditor wanted to ensure we legitimately had two separate children (2005 and 2006) and were not someone trying to get away with something.