2016 Instructions For Form 8839 (Page 2 of 8) in pdf

Qualified Adoption Expenses

payment of the legal fees produces the same result as the

employer's reimbursement of the legal fees in Example 2

Qualified adoption expenses are reasonable and necessary

($8,000 exclusion and $12,000 credit).

expenses directly related to, and for the principal purpose of, the

Example 4. Paul paid $30,000 in qualified adoption

legal adoption of an eligible child.

expenses to adopt an eligible foreign child, and the adoption

Qualified adoption expenses include:

became final in 2016. Under a qualified adoption assistance

Adoption fees,

program, Paul's employer reimbursed him for $13,460 of those

Attorney fees,

expenses. Paul may exclude the $13,460 reimbursement from

Court costs,

his income. The remaining $16,540 of expenses ($30,000 -

Travel expenses (including meals and lodging) while away

$13,460) continue to be qualified adoption expenses that are

from home, and

eligible for the credit. However, Paul's credit is dollar-limited to

Re-adoption expenses relating to the adoption of a foreign

$13,460. The remaining $3,080 ($30,000 - $13,460 - $13,460)

child.

may never be claimed as a credit or excluded from gross

income.

Qualified adoption expenses don't include expenses:

Who Can Take the Adoption Credit or

For which you received funds under any state, local, or

federal program,

Exclude Employer-Provided Adoption

That violate state or federal law,

For carrying out a surrogate parenting arrangement,

Benefits?

For the adoption of your spouse's child,

Reimbursed by your employer or otherwise, or

You may be able to take the credit or exclusion if all three of the

Allowed as a credit or deduction under any other provision of

following statements are true.

federal income tax law.

1. Your filing status is single, head of household, qualifying

widow(er), or married filing jointly. Generally, if you are married,

Employer-Provided Adoption Benefits

you must file a joint return to take the credit or exclusion.

In most cases, employer-provided adoption benefits are

However, if you are married and aren't filing jointly, you may be

amounts your employer paid directly to either you or a third party

able to take the credit or exclusion on your own return if you are

for qualified adoption expenses under a qualified adoption

considered unmarried because you are legally separated or

assistance program. But see

Child with special

needs.

living apart from your spouse and you meet certain other

requirements. See

Married Persons Not Filing

Jointly.

A qualified adoption assistance program is a separate written

2. Your modified adjusted gross income (MAGI) is less than

plan set up by an employer to provide adoption assistance to its

$241,920 or you have a carryforward of an adoption credit from

employees. For more details, see Pub. 15-B, Employer's Tax

2015. To figure your MAGI, see

Line 7

(for the credit) or

Line 23

Guide to Fringe Benefits.

(for the exclusion).

Employer-provided adoption benefits should be shown in

3. You report the required information about the eligible

box 12 of your Form(s) W-2 with code T. Your salary may have

child in Part l.

been reduced to pay these benefits. You may also be able to

exclude amounts not shown in box 12 of your Form W-2 if all of

Married Persons Not Filing Jointly

the following apply.

You may be able to take the credit or exclusion if all of the

You adopted a child with special needs. See

Column

(d), for

following apply.

the definition of a child with special needs.

Statements (2) and (3) under Who Can Take the Adoption

The adoption became final in 2016.

Credit or Exclude Employer-Provided Adoption Benefits are true.

Your employer had a written qualified adoption assistance

You lived apart from your spouse during the last 6 months of

program as described earlier.

2016.

The following examples help illustrate how qualified adoption

The eligible child lived in your home more than half of 2016.

expenses and employer-provided adoption benefits apply to the

You provided over half the cost of keeping up your home.

maximum adoption credit allowed.

Additionally, a person who is filing separately may claim an

Example 1. Madelyn paid $10,000 in qualified adoption

adoption credit carryforward from a prior year or years, provided

expenses for the adoption of an eligible child. Under a qualified

that, if the person was married in the year in which the qualified

adoption assistance program, Madelyn's employer reimbursed

adoption expenses first became allowable for the credit, the

her for $4,000 of those expenses. Madelyn may exclude the

person filed a joint return for that year.

$4,000 reimbursement from her income. However, because of

When To Take the Credit or Exclusion

the employer reimbursement, $4,000 of her expenses no longer

meet the definition of qualified adoption expenses. As a result,

When you can take the adoption credit or exclusion depends on

Madelyn's maximum adoption credit is limited to $6,000

whether the eligible child is a citizen or resident of the United

($10,000 - $4,000).

States (including U.S. possessions) at the time the adoption

Example 2. Haylee paid $20,000 in qualified adoption

effort began (domestic adoption).

expenses for the adoption of an eligible child, including $8,000

Child who is a U.S. citizen or resident (U.S. child). If the

of legal fees. Under a qualified adoption assistance program,

eligible child is a U.S. citizen or resident, you can take the

Haylee's employer reimbursed the $8,000 of legal fees. Haylee

adoption credit or exclusion even if the adoption never became

may exclude the $8,000 employer reimbursement from her

final. Take the credit or exclusion as shown in the following table.

income. However, because of the employer reimbursement,

$8,000 of Haylee's expenses no longer meet the definition of

qualified adoption expenses. As a result, Haylee's maximum

adoption credit is limited to $12,000 ($20,000 - $8,000).

Example 3. The facts are the same as in Example 2 except

that instead of reimbursing Haylee for her legal fees, the

employer directly paid the $8,000 to the law firm. The employer's

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Form 8839 (2016)

2016 Instructions For Form 8839 Page 2

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