Same-Sex Partners Can Claim Adoption Credit on Federal Taxes

While federal tax law provides several unique challenges for same-sex couples, it also offers one often overlooked economic advantage to certain of them. Because same-sex couples have no legal relationship to each other under current federal law, a partner may adopt the child of his/her partner and claim the adoption expense tax credit on his/her taxes, even if the couple is married under state law.

Sharon McGowan and Emily Hecht married in Boston in 2010. According to CNN, after Hecht gave birth to a daughter, Sadie, McGowan began the process of a second-parent adoption, which concluded late last year. McGowan spent in excess of $2,000 completing the process of adopting Sadie.

Section 36C of the Internal Revenue Code permits taxpayers to take, as a credit, “the amount of the qualified adoption expenses paid or incurred by the taxpayer.” The credit does not apply, though, to a taxpayer who incurs expenses in the process of adopting the legal child of his/her spouse. Maryland, where the family lives, recognizes the couple’s marriage. However, since federal law says that same-sex couples are not spouses, even if they are considered legally married under state law, this means that the prohibition does not apply and same-sex partners are eligible to claim the credit.

For parents adopting in 2012, like McGowan, the law allows claiming a nonrefundable credit of up to $12,650 per child. The credit was set to expire after 2012, but was extended as part of the “fiscal cliff” legislation passed by Congress. In 2013, the credit limit climbs to $12,970. The credit also contains an income limit. The “phase out” begins at a modified adjusted gross income (MAGI) of $189,710. Taxpayers with a MAGI above $229,710 are excluded from claiming the credit. Claiming the credit is not always easier, however. The New York Times reported that, in previous years, several lesbian couples struggled with improper denials of the credit. Because the credit was in excess of $13,000 and refundable in those years, the IRS considered it a frequent source of abuse, and scrutinized those returns closely. The two leading bases emerged for denying the credit to the lesbian taxpayers, according to the report: the failure to terminate parental rights of the birth mother, and the couple’s status as registered domestic partners. Both bases, of course are flawed. Termination of the birth mother’s rights is not a requirement to claim the credit and, as noted above, federal law grants same-sex couples no recognition, regardless of their standing as recognized domestic partners, or spouses, under state law.

Filing one’s federal income taxes can be an especially challenging process for same-sex couples, especially those with children. To ensure that you get the tax credits to which you are entitled, consult the tax attorneys at Samuel C. Berger, P.C. and the CPAs at S.C. Berger, P.C., who help people throughout New York and northern New Jersey a full range of income tax issues. To consult our attorneys and CPAs, contact us online or call (201) 587-1500 or (212) 380-8117.

More Blog Posts:

American Families Struggle with Foreign Bans on Intercountry Adoptions, New York & New Jersey Immigration Lawyer Blog, Feb. 21, 2013
International Adoption and Immigration Remains Popular, but May Hide the Risk of Abuse and Fraud, New York & New Jersey Immigration Lawyer Blog, May 11, 2012
Pregnancy and Childcare Discrimination: What New York and New Jersey Businesses Should Know, New York & New Jersey Business Lawyer Blog, Apr. 27, 2012