How to Claim the Canadian Adoption Tax Credit

In 2005, the federal government of Canada introduced an Adoption Expense Tax Credit to help families with some adoption-related expenses for the adoption finalization of a child 18 years old or younger. The purpose of the tax credit is to help alleviate some of the cost associated with the adoption process, whether it be international, private domestic or public domestic.

Adoption Expenses Eligible for Federal Tax Credit

As each adoption process can come with unique costs associated with the individual needs of the adoption agency, country of origin or even the child, the Department of Finance Canada outlines these factors for eligible adoption costs:

  • Fees paid to an international or domestic adoption agency that is licensed by the provincial or territorial government.
  • Court, legal and administrative expenses such as an adoption homestudy and fostercare for the child.
  • Reasonable and necessary travel expenses for the adoptive parents and child.
  • Document translation fees.
  • Mandatory fees paid to a foreign institution in order for the adoption to take place.
  • Mandatory fees paid in respect of the child’s immigration paperwork.
  • Any other reasonable adoption-related fees required by adoption agencies or the provincial or territorial government.

The adoption period in which eligible expenses can be claimed begin from the time the child’s adoption file is opened with the government ministry or adoption agency to the time the adoption order is issued from a Canadian or foreign court. Eligible adoption expenses may have incurred for several years before finalization, so it is advisable to keep a file of receipts in case of future audit.

Procedure for Claiming Adoption Tax Credit

The maximum claim is up $10,909 which translates to about a $1600 refund or 16% of eligible expenses. The claim can be divided between two adoptive parents, but cannot exceed the $10,909 combined. According to this credit is non-refundable, which means that if the government is already giving the adoptive parents a refund based on that year’s tax information, the adoption tax credit will amount to nothing for them. However, for those who owe money to the government, the tax credit will help their amount owing get closer to zero.

In the case of an audit, adoptive parents are also responsible for showing proof of the adoption being finalized within the tax year by providing a court adoption order or other paperwork that indicates the requirements have been met in the jurisdiction of the adoptive parent’s residence. If an adoption fell through, unfortunately the adoptive parents are not eligible for a tax credit for the related expenses, as an adoption was not finalized through court.

Recognizing the financial costs associated with Canadian adoptions, the Adoption Expense Tax Credit helps adoptive families recoup some of the expenses they incurred in the process of realizing their dream of becoming parents.