Federal Tax Credits forTaxpayers who Adopt Children

Taxpayers who adopt children may qualify for a federal tax credit to cover their adoption expenses. The adoption credit in 2013 is up to $12,970. The full credit amount can be claimed for special needs children without regard to the taxpayers’ expenses; the credit is otherwise limited to qualified adoption costs. Income thresholds may limit or prevent taxpayers from claiming the credit.

For married persons, there is one eligibility rule: They must file a joint return unless the couple lived apart for the last 6 months of the year. This eligibility rule recently prevented a loving mother from taking the credit for adopting a child in 2009. She filed a separate tax return from her husband for 2009, and the IRS disallowed her credit because of the married-filing-jointly requirement (she didn’t live apart from her husband).

She argued that the joint filing requirement violated her constitutional rights. Over the years, she had adopted 15 children, her husband never adopted any of them, and she provided all of their support. In effect, she claimed that the tax rule penalized her for getting married in 2008. The Tax Court, however, did not find in her favor.

A tax classification, such as married filing jointly, is “constitutionally valid if ‘there is a plausible policy reason for the classification, the legislative facts on which the classification is apparently based rationally may have been considered to be true by the governmental decision-maker, and the relationship of the classification to its goal is not so attenuated as to render the distinction arbitrary or irrational.’” This is complex language that simply means that the joint filing requirement for the adoption credit does not violate the Equal Protection Clause in the Constitution.

Source: Nancy Louise Field v. Commissioner; T.C. Memo. 2013-111