What Form 8839 (2019) Is For
Form 8839 (2019) calculates both the adoption credit and the exclusion for employer-provided adoption benefits under a qualified adoption assistance program. Adoptive parents use it to report paid qualified adoption expenses, determine allowable credit amounts, and identify income limits based on modified adjusted gross income. The form ensures that taxpayers receive partial credit or full credit for the same child only once, thereby preventing the double-counting of adoption-related expenses across tax years.
When You’d Use Form 8839 (2019)
Taxpayers use Form 8839 (2019) to claim the federal adoption tax credit for adoptions finalized in that tax year. You’ll file it with your federal income tax return when you pay qualified expenses for an eligible child, including foreign or U.S. adoptions. If you missed claiming this federal tax credit, you can file an amended tax return to request it within three years of your original filing. The adoption effort must have begun before the tax year to qualify.
Key Rules or Details for 2019
- Maximum Adoption Tax Credit and Income Exclusion: The maximum credit and the maximum amount of employer-provided benefits are each $14,080 per eligible child for the 2019 tax year.
- Income limits: The adoption credit begins to phase out when modified adjusted gross income exceeds $211,160 and is eliminated at $251,160.
- Qualified adoption expenses: Qualified expenses include reasonable and necessary expenses such as legal fees, court costs, agency fees, and travel expenses directly related to the adoption effort.
- Special rules for a child with special needs: Adoptive parents who finalized the legal adoption of a child with special needs may claim the full credit amount even with minimal expenses paid.
- Carryforward rule: If your adoption credit exceeds your federal income tax liability, the unused portion can be carried forward for up to five years.
- Restrictions on same expenses: Taxpayers cannot claim both the exclusion and the credit for the same costs covered by employer-provided adoption assistance or employer-paid benefits.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Provide information about the adopted child
Enter the adopted child’s name, birth year, child’s identifying number, and note whether the child was foreign or domestic. Indicate if the child had special needs and whether the adoption was finalized during the 2019 tax year.
Step 2: Report employer-provided adoption assistance
List the employer-provided adoption benefits you received through your qualified adoption assistance program. Determine the portion of these adoption benefits eligible for the income exclusion and subtract them from your total qualified expenses.
Step 3: Calculate the adoption credit
Use Part II of the form to calculate the allowable credit. Enter the maximum adoption credit per eligible child, then subtract any credit previously claimed for the same child. Apply income limits based on modified adjusted gross income to determine the final amount.
Step 4: Transfer figures to your tax return
Report the allowable credit on Schedule 3 of your federal tax return. Reduce your wages by the amount of any excluded employer-provided adoption assistance and note “AB” beside the entry for documentation purposes.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Double-counting expenses: Taxpayers sometimes claim both the federal adoption credit and income exclusion for the same expenses. Avoid it by completing the employer benefits section first and subtracting reimbursed costs before claiming the credit.
- Using the wrong tax year: Some adoptive parents claim expenses in the year they were paid instead of the year the adoption was finalized. Avoid it by claiming adoption expenses in the correct tax year for foreign or U.S. adoptions.
- Ignoring income limits: Overlooking the modified adjusted gross income phase-out can lead to calculation errors. Avoid this by using the worksheet in the IRS instructions to update your income accurately.
- Missing identification details: Failing to provide a child’s identifying number delays processing. Avoid it by applying early for an Adoption Taxpayer Identification Number or providing the Social Security Number of the adopted child.
- Forgetting the carry-forward rule: Some taxpayers lose unused credit after the first year. Avoid it by tracking the carried forward credit on the Adoption Credit Carryforward Worksheet for up to five years.
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 you submit Form 8839 with your tax return, the IRS applies your adoption tax credit directly against your federal income tax liability. If your allowable credit exceeds your tax bill, the remainder can be carried forward to reduce future federal tax liability.
The IRS may request verification of legal adoption documents, employer-provided benefits, or details regarding adoption assistance. Keep receipts, adoption agency records, and state welfare agency letters confirming the adoption effort and the child’s eligibility status.
FAQs
Can I claim the adoption credit for adopting my spouse’s child?
No, expenses for adopting your spouse’s child are not qualifying adoption expenses under federal tax credit rules, even if you paid adoption fees or attorney fees.
What if my adoption expenses exceed my federal income tax liability?
If your allowable credit exceeds your federal tax liability, the unused portion can be carried forward and applied against tax owed in future years for up to five years.
How do income limits affect my ability to claim the adoption credit?
The credit begins to phase out when your modified adjusted gross income exceeds $211,160. It is completely phased out at $251,160 for the 2019 tax year.
Can I claim adoption expenses if the adoption was not finalized at the time of the claim?
Yes, you may claim qualifying adoption expenses for a U.S. child if your adoption effort began but was not finalized, provided you paid reasonable and necessary expenses during that tax year.
What types of employer-provided adoption benefits are eligible for exclusion?
Employer-provided adoption assistance through a qualified adoption assistance program may be excluded from income if used for reasonable and necessary adoption-related expenses and properly documented on your tax return.
What if the adoption involves a foreign child or sibling group?
For a foreign child, you can claim the adoption credit only in the tax year the adoption becomes final. Sibling group adoptions follow the same rule for each eligible child.
Can foster care adoptions qualify for the full credit?
Yes, if a state welfare agency determines a foster care child has special needs, adoptive parents may claim the maximum adoption tax credit even if they paid few or no expenses.
