What Form 8839 (2018) Is For
Form 8839 (2018) allows adoptive parents to claim the federal adoption tax credit and the income exclusion for employer-provided adoption benefits. This form helps taxpayers recover part of their qualified adoption expenses, such as attorney fees, court costs, and travel expenses. It applies to both domestic adoption and foreign child adoptions, allowing families to reduce their federal income tax liability for the year.
When You’d Use Form 8839 (2018)
You must file Form 8839 (2018) when you paid qualified adoption expenses or received employer-provided adoption benefits in 2018. Adoptive parents should include the form with their federal income tax return when claiming the credit or exclusion. Those filing an amended tax return for the prior year should attach the updated form to claim any unused credit carried forward from previous years.
Key Rules or Details for 2018
- Maximum adoption credit: The maximum adoption tax credit for 2018 is $13,810 per eligible child. This limit applies to both the credit and the income exclusion.
- Income phase-out: The credit begins to phase out when modified adjusted gross income exceeds $207,140 and ends completely at $247,140.
- Qualified adoption expenses: Qualified expenses include reasonable and necessary expenses paid for a legal adoption, such as adoption fees, court costs, attorney fees, and travel expenses.
- Eligible child requirements: An eligible child must be under 18 years old or physically or mentally incapable of self-care.
- Special needs and minority or sibling group adoptions: For children officially determined to have special needs or who are part of a minority or sibling group, adoptive parents may claim the full adoption tax credit even if expenses paid are less.
- Carryforward rule: Any unused credit can be carried forward for up to five years using the Adoption Credit Carryforward Worksheet.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Gather documentation
Collect all receipts and invoices to determine the total qualified adoption expenses. Include proof of adoption fees, attorney fees, court filings, travel expenses, and employer-provided benefits.
Step 2: Complete Part I—Child information
Enter each adopted child’s identifying number, such as a Social Security number or adoption taxpayer identification number. Indicate whether the adoption effort began in the same tax year.
Step 3: Calculate adoption credit
Use Part II to determine your adoption credit. Enter the maximum credit for each child and subtract any prior year benefits worksheet amounts. Apply your modified adjusted gross income limits to confirm eligibility.
Step 4: Determine employer-paid benefits
Suppose your employer provided adoption assistance—complete Part III. Enter the total amount of adoption assistance program payments, then calculate both the exclusion and the remaining credit allowed.
Step 5: Attach and file
Attach Form 8839 (2018) to your federal tax return. Ensure that you include all required child identification numbers and any relevant adoption assistance documentation. File electronically or by mail based on IRS instructions.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Claiming the same expenses twice: Many taxpayers mistakenly claim both the credit and the exclusion for the same costs. To avoid this, calculate employer-paid benefits first, then subtract them from total qualified expenses.
- Using an incorrect modified adjusted gross income: An incorrect MAGI can cause inaccurate phase-out calculations. Always verify the modified adjusted gross income before entering it on the form.
- Missing documentation for foreign adoptions: Taxpayers adopting an eligible foreign child often forget to report adoption expenses or fail to include proper records. Keep copies of adoption decrees and court documents for future verification purposes.
- Forgetting to carry forward unused credit: If your tax liability is smaller than your credit, you can carry forward the unused credit up to five years. Use the adoption credit carry-forward worksheet to ensure no benefit is lost.
- Incorrect child information: Errors in a child’s identifying number delay processing. Double-check your child’s Social Security or adoption taxpayer identification number before filing.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
After filing Form 8839 (2018), the IRS applies the adoption credit against your federal tax liability. Any unused credit is automatically carried forward. Keep all records for at least three years, including receipts and documentation from the adoption assistance program, in case of verification requests. Adoptive parents with employer-provided benefits should confirm that both the exclusion and the adoption tax credit were correctly applied to their federal income tax.
FAQs
What expenses qualify as qualified adoption expenses?
Qualified adoption expenses include reasonable and necessary expenses such as attorney fees, court costs, and travel expenses directly related to a legal adoption.
Can adoptive parents claim both the adoption tax credit and the child tax credit?
Yes, adoptive parents can claim both the adoption tax credit and the child tax credit for the same adopted child as long as each credit’s conditions are met.
How do employer-provided adoption benefits affect my adoption credit?
Employer-provided benefits reduce the total qualified adoption expenses eligible for the credit. You must subtract any employer-paid amounts before calculating your final credit.
What if my modified adjusted gross income is too high to claim the credit?
If your modified adjusted gross income exceeds the limit, your adoption credit may phase out. However, you may still be eligible for partial credit, depending on your income range.
Can I carry forward unused credit if my tax liability is low?
If your federal income tax liability is smaller than your maximum adoption credit, you can carry forward the unused credit for up to five years.
Does the adoption credit apply to adopting a child of my spouse?
Expenses for adopting your spouse’s child are not considered qualifying adoption expenses and are excluded from both the credit and the income exclusion.
What happens if I adopt multiple children in the same year?
You can claim the maximum credit for each adopted child. Ensure that you list each child’s identifying number and calculate separate adoption costs for each adoption effort.
