We have adoption expenses from 2015 (US domestic), but haven't yet finalized an adoption. Where in Turbo Tax can we claim these expenses? It seems to request a kid's name

[taxquestions1234]

We incurred a lot of adoption expenses in 2015 for a US domestic adoption. It's now 2017 and we still haven't been placed with a child. Can I claim those expenses and how do I do this if I don't have a child's name or date of birth to enter? TurboTax is saying that we don't qualify for the tax credit, but everything I'm reading says that we do. Help? 🙂

[MichaelDC · Accepted solution]

According to the IRS, you qualify for 2015 U.S. domestic adoption credit expenses. If you adopted a child, began adoption proceedings, or tried unsuccessfully to adopt a child during the year, you might be eligible to receive a tax credit for your adoption expenses. There is a workaround below for the adoption not yet finalized.

As you mentioned, if the adoption is finalized, you can take the adoption credit for expenses that occurred during 2016; otherwise, you take the credit only for expenses from 2015.

Example: Roberta had $3,000 in adoption expenses in 2015 and $4,500 in 2016. If the adoption is finalized, then she can claim all $7,500 in expenses toward the credit on her 2015 return. If the adoption wasn't finalized, then she can claim only those expenses from the prior year, $3,000 from 2015 in this case.

An adoption credit lowers your tax amount. Starting in the year 2012 or later, if you don't owe taxes, then your credit isn't used. The unused credit is carried forward to the next tax year and again for five years until the credit is used up.

To claim the adoption credit in TurboTax:

1.       Open your return in TurboTax.

2.       Search for adoption credit and then click the "Jump to" link in the search results.

3.       Read the info on the Credit for Adoption Expenses screen, and if the situation applies to you, answer Yes.

4.       Follow the onscreen instructions.

5.       On the "Tell Us a Little More About This Adoption" screen, select "This was a failed adoption attempt." (See the attached screenshot below. Click to enlarge.)

6.       Enter your 2015 Qualified Adoption Expenses and click "Continue" (See the attached screenshot below. Click to enlarge.)

The above will make a notation for the name of the "Adopted Child" (See the attached screenshot below. Click to enlarge)

Make certain you qualify?

Eligibility requirements:

• Eligible expenses include: court costs, attorney fees, travel (including meals and lodging), and other expenses related to adopting a child.
• An eligible child is a child under age 18. If the child turned 18 during the year, include only the expenses paid up to their 18th birthday. Individuals 18 or older are eligible only if they are mentally or physically incapable of self-care.
• Your modified adjusted gross income is less than $241,920.
• If your filing status is married filing separately, then the child you are adopting has lived with you for more than half of the tax year, and you’ve provided more than half of his or her support. In addition, you’ve have lived apart from your spouse for the last six months of the tax year.

[jataxmesc]

Is this advice correct? I am in the same situation. It’s not a failed attempt we are just still waiting to adopt. Turbo Tax needs a button to click called “I’m still waiting to adopt.”

[maglib]

[mention://9078236 [mention://9078236 @jamescressey]]  enter UNKNOWN for the childs first and last name and TT will let you proceed.

Generally, the credit is allowable whether the adoption is domestic or foreign. However, the timing rules for claiming the credit for qualified adoption expenses differ, depending on the type of adoption.

• A domestic adoption is the adoption of a U.S. child (an eligible child who is a citizen or resident of the U.S. or its possessions before the adoption effort begins). Qualified adoption expenses paid before the year the adoption becomes final are allowable as a credit for the tax year following the year of payment (even if the adoption is never finalized and even if an eligible child was never identified).
• A foreign adoption is the adoption of an eligible child who isn't yet a citizen or resident of the U.S. or its possessions before the adoption effort begins. Qualified adoption expenses paid before and during the year are allowable as a credit for the year when it becomes final.

READ MORE w/ Examples: https://www.irs.gov/taxtopics/tc607

Once an adoption becomes final, and subject to the dollar limitation, qualified adoption expenses paid during or after the year of finality are allowable as a credit for the year of payment, whether the adoption is foreign or domestic.

As a result of the timing rules, qualified adoption expenses allowable in the current year may include expenses paid in a former year or years.

[jamram2003]

TT will let you continue if you enter "Unknown" for the first and last name, but  your return will be rejected if you try and file it electronically without a birth date for the child. 

@jataxmesc is correct that TT needs a checkbox for adoption not finalized, or child not identified. The IRS does state that child does not need to be identified to take the credit if taken for the tax year after the year of te expense. 

It does not seem correct to indicate that the adoption expense was a failed attempt.