[WizardofOz]

In October 2008, my son's birthparents thought of placing his bio sister for adoption with me. I contacted an adoption attorney and started the process of an independent adoption. Right at the end, the birthparents regretted their decision and took the baby back.

I had a significant amount of expenses (~4,000) during this failed adoption experience and I think I should be able to claim them on my taxes. Can I claim these expenses on 2008 or on 2009?

thanks!

[ermiller]

You can claim those fees in on your 2009 taxes.

The tax credit for domestic adoptions allows for failed adoption expenses in the year after the year you paid them. So since you paid them in 2008, you will be able to claim them in 2009. You won't be able to e-file (unless they changed the rule) and you will need to list the agency/attorney you paid expenses to at the bottom of the adoption tax credit form since you won't have an ATIN or SSN to use since you did not have a placement.

[WizardofOz]

Thank you very much for your answer! With "adoption tax credit form" you mean form 8839? (that's what I found when I googled it).

[ermiller]

Yup, I couldn't think of the number off the top of my head. It is form 8839

If you use a program like TurboTax, when you file your taxes for 2009, it will walk you through all the steps necessary and fill out the proper forms. We have used it every year and found it to be very helpful and easy to use.

[WizardofOz]

Thank you. Then I have another - sorry, it's a dumb and hypothetical - question: I am waiting now for a match (just like you, ermiller!!). Let us assume that in year X, I have paid birthmother living expenses but the prospective birthmother changed her mind and did not place. Can I claim these expeneses on my taxes and if yes, in what year? Does it matter the money has been paid using an agency of an attorney (independent adoption)?
Thanks!

[DianeS]

Birthmother expenses are not directly addressed by the IRS in their instruction forms. But if you are paying those expenses to your agency or attorney, then they are likely to count in the general bucket of "fees". (Yet another reason to never pay money directly to a family considering placing their child for adoption. Always pay it to your agency/attorney and get a receipt.)

The IRS rule about using the credit against adoption expenses is that you can calim the tax credit in the year the adoption is finalized, OR in the year after the expenses were paid. Whichever comes first.

So if you pay fees in 2009 and have a finalized adoption in 2009, you claim those expenses against the credit on your 2009 taxes.
But if you pay fees in 2009 and the adoption does not finalize in 2009 (for whatever reason), then you claim those expenses against the credit on your 2010 taxes.
And yes, that means if you pay fees in 2009, and finalize in 2010, you can claim both years worth of expenses against the credit on your 2010 taxes.

One thing to be aware of is that the IRS consideres all attempts to adopt a child as being ONE attempt to adopt ONE child. So you only qualify for one credit total. So the $4,000 you paid for your failed match last year can't ever be claimed again later, even if your next match is successful and cost $11,000. You've already used $4,000 of the credit, and only have $7,000 left to use on what will hopefully be the finalized adoption.