The Adoption Tax Credit and Special Needs Children

December 15, 2010

Recently I wrote about the expansion of the adoption tax credit for 2010. The credit was raised to $13,170.00 for 2010 and is generally available to cover qualified expenses incurred as a result of the legal adoption of a child under the age of eighteen. 

When adopting a special needs child, however, the full amount of the credit can be claimed even if there were no actual expenses. For residents of Pennsylvania, in order to claim the credit the Commonwealth must have made a determination of special needs for the child. Generally speaking, the state should make such a determination if the child:

  • Is over the age of five and under the age of eighteen;
  • Is a member of a minority group;
  • Has a natural brother or sister in the same adoptive home;
  • Has a physical, mental or emotional condition or handicap; or
  • Has a genetic condition which indicates a higher risk of developing a disease or handicap.

Such circumstances tend to reduce the likelihood that a child will be adopted without some form of assistance. Hence, the adoption credit serves to subsidize the adoption of a special needs child.

A taxpayer claiming the adoption credit must file IRS Form 8839. In addition, the taxpayer must include a copy of the determination of special needs. For more information on adoption and related issues, please refer to the Pennsylvania Statewide Adoption and Permanency Network.