Making the decision to adopt a child is a unique step in building a family. In many cases, the decision to adopt comes at the end of a long bout of infertility. The adoption process can be very expensive because there are legal costs and others and many of the payments you make may be tax-deductible. It is recommended to always check with your tax professional before claiming adoption expenses on your tax return.
Legal Expenses
There are strict adoption laws in each states. Many of those laws concern the fitness of the prospective adoptive parents. Those who want to adopt will have to be licensed by their state's department of children and family service. That means filling out a long application and revealing all pertinent family and financial details and then being subject to an interview and a study. This can cost anywhere between $500 and $3,000 depending on the state and this is a tax-deductible expense.
Travel Expenses
You may be adopting from out of state. You may have to drive or fly to a different state on a regular basis in order to secure the adoption. A portion of your travel expenses may be tax-deductible. You must keep track of airfare, hotel bills, rental car expenses, restaurant bills and miscellaneous items and present them to your tax professional.
Birth Mother Expenses
You will not be giving any payments to the birth mother. Nearly all of the 50 states frown on this possibility. However, the birth mother may be in a poor or destitute financial position and you can help out with expenses if they impact the health of the unborn fetus. For example, the birth mother may not be able to meet her rent expenses. In that case, your lawyer can set up an account for you to deposit money in for the birth mother's expenses. If a check is drawn out of that account to pay rent, the date of the withdrawal and the reason for the disbursement must be noted. These "birth mother" expenses may be tax-deductible.
Features
The government and the Internal Revenue Service encourages the process of family building. They will not necessarily reject your expense claims on your tax return. However, you must have excellent record keeping and documentation for the expenses to be allowed. If you fly to a city and claim that you were trying to adopt a child there, you must be able to back that up with records showing you met with a lawyer, a birth mother or the birth mother's representative.
Time Frame
Adoption expenses may be claimed in the year of the return or the year after the adoption depending on when the adoption was finalized. For example, if you adopted a child in 2009, you can claim expenses for the adoption that you paid in 2008 and 2009 on the 2009 return. However, if you finalized your adoption in 2009, but your continued to pay expenses in 2010 (lawyers' fees), you may want to wait until you file your 2010 return until you claim those expenses.
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