Adoption Expenses Deduction (code 76)

See also Special Needs Adoption Credit

The State of Utah encourages adoption as a means of finding suitable homes for children who are in need.

What adoption costs are deductible? Who may claim them and when?

Utah allows individuals to claim qualifying adoption expenses in ONE of three ways:

1. the year in which the expenses are paid or incurred,
2. the year in which the adoption is finalized, or
3. the year in which the taxpayer may claim the federal adoption credit.

Qualified adoption expenses may be deducted even if the adoption process is terminated.

The adoption expenses deduction is limited to the actual and reasonable expenses associated with the pregnancy, birth and adoption. Expenses are deductible to the extent the costs are not reimbursed by an insurance company, public welfare agency, or private charitable organization. Only adoptive parents may claim the adoption expenses deduction.

Costs that may be claimed include, but are not limited to:

• Medical expenses associated with prenatal care, childbirth, and neonatal care
• Fees paid to reimburse the state if the birth mother receives public assistance related to the birth and adoption
• Fees paid to an attorney, court or placement service for arranging the adoption
• All actual and reasonable travel costs incurred exclusively for the purpose of completing adoption arrangements (mileage deduction is at the federal medical mileage rate)
• Living expenses of the birth mother, if paid by the adoptive parents as part of the adoption

Costs that may NOT be claimed include, but are not limited to:

• Home improvements
• Food, clothing, and other routine expenses associated with the child's care
• Housing or household expenses of the adoptive parents
• Legal fees arising from custody action after finalization of the adoption
• Surrogate parenting arrangements
• Expenses paid or reimbursed by your employer or any other person or organization (if the reimbursement is made in a tax year after the deduction of the adoption expense, the reimbursement must added back in the year reimbursed)
• Expenses paid using funds received from federal, state, or local programs

Are adoption expenses eligible for the deduction when the adoption falls through?

Yes. The purpose of this deduction is to encourage adoption. If the adoption process is abandoned, the adoptive parents may still claim the deduction.

What, if any, foster care costs are valid if the child is later adopted by the foster parents?

When a foster care provider applies to adopt a foster child in his or her care, the unreimbursed foster care expenses incurred prior to the application for adoption are not adoption expenses. The foster parent is entitled to deduct only the actual unreimbursed adoption expenses.