By Sharon Frankenberg,
Attorney at Law

Adoption is covered by Chapter 1 of Title 36 of the Tennessee Code Annotated as well as by multiple court decisions interpreting the same.  The process of adoption is a legal proceeding which permanently transfers the parental rights and responsibilities relating to a child from the biological family to the adoptive family.   In Tennessee,  individuals who have been approved as foster parents are dually approved to adopt.  If you decide to become a foster-adoptive parent through the Tennessee Department of Children’s Services, you will need to complete a parent preparation process called PATH (Parents as Tender Healers).  PATH is a 23-hour education and self-assessment process.  In addition, a homestudy from a licensed child placing agency will be required if you wish to foster or adopt.

There is financial assistance available for families who adopt.  A federal adoption tax credit is available for many parents who adopt to help pay for their out of pocket expenses associated with the adoption process.   The credit of up to $13,190 is paid one time for each adopted child and should be claimed in the year the adoption is finalized.  To be eligible for the adoption tax credit , parents must have adopted a child other than a stepchild and that child must be either under 18 or be physically or mentally unable to take care of himself or herself.   There are also income guidelines which limit the amount of the tax credit to be awarded.  Families with a modified adjusted gross income above $237,880 cannot claim the credit, those below $197,880 may claim up to the full credit and those in between may claim partial credit.  IRS Form 8839 Qualified Adoption Expenses must be filed with your Form 1040 federal income tax return to claim the credit.

Families who adopt a child who has been determined to have special needs can claim the full credit of $13,190 on the line that asks for expenses-whether or not they actually had any expenses.  The adoption tax credit is not a refundable credit so taxpayers can only get the credit refunded if they have federal income tax liability.   It is still a good idea to file the Form 8839 to establish the credit to carry it over for five additional years in case the taxpayers’ tax liability goes up or the credit becomes refundable.

There is also a Federal Child Tax Credit described in IRS Publication 972.  There are seven specific conditions for a child to qualify for purposes of the child tax credit.  If you are a U.S. citizen or U.S. national and you have an adopted child who lived with you all year as a member of your household in a particular tax year, that adopted child meets one of the conditions for the child tax credit in that tax year.  There is also an Additional Child Tax Credit available to certain individuals who get less than the full amount of the child tax credit.  This additional credit may allow you to get a refund even if you do not owe any tax.  See IRS Publication 972 for more information on this.

DISCLAIMER:  I am not a tax expert of any sort.  You should consult a C.P.A. or other tax adviser to determine if you qualify for any of the tax deductions and tax credits discussed above.  Sharon Frankenberg is an experienced attorney licensed in Tennessee since 1988. Her office number in Knoxville is (865)539-2100.