Taxpayer asks:
Hi Kelly,
Can failed adoption expenses still be duducted even tho the adoption did not go thru??
Thanks
Taxgirl says:
There’s a “yes” and a “no” depending on your circumstances (see comments below). That said, if you paid qualifying expenses for an adoption in the previous tax year for an adoption which became final in the tax current year, you may be able to claim all of your qualifying expenses in one tax year. In that case, some of the expenses that were related to a failed adoption (for example, certain legal or agency fees) may qualify as “directly related” to the final adoption of an eligible child. If you’re not sure whether any such expenses from a prior attempt would qualify, ask your tax advisor.
The adoption credit for 2008 is $11,650 per child. For 2009, the amount increases to $12,150.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
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{ 3 comments… read them below or add one }
Three things to clarify your answer a bit:
1. If you have a failed domestic adoption, you can claim the credit for the expenses in the following year. Section 23(a)(2)(A) only says that if you incur qualified expenses in a year before the adoption becomes final, you can take the credit for those expenses in the following year. There’s no requirement that the adoption ever be finalized.
2. You can never claim an adoption credit for expenses related to a failed foreign adoption. Section 23(e)(1) allows a credit for expenses related to the adoption of a foreign child only if the adoption becomes final, and there’s a Revenue Procedure (2005-31) that specifically defines when a foreign adoption is considered to be “final”.
3. The IRS, in Form 8839 and its instructions, interprets the statute to say that the credit limitation is per successful attempt. That is, if in 2008 you incur $3,000 in an unsuccessful attempt to adopt a domestic child, and then in 2009 you incur $15,000 in a successful attempt to adopt a different child, the IRS says you’re limited to $12,150. I don’t see that in the statute, nor do several attorneys I know who lobbied for the adoption credit. The statute just says the limit is per child. If you’re in this position, you definitely need to discuss it with your tax advisor.
Can you tell I’ve been through the adoption process? This is a bit of a pet issue for me.
Thanks for the clarification, I tweaked my reply. I’ve never seen an adoption credit claimed when not followed by a final adoption in the next year, so good to know. The instructions are not terribly well written, I’ll agree.
It’s fun to read some of the info out there – my favorite was the long explanation about why buying a baby on the black market is not a qualified expense. Um, yeah!
Just to clarify….I cannot claim expenses on a failed, international adoption…even if the agency was within the U.S.?