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Federal Adoption Expense Tax Credit

The 2005 Federal budget introduced a Adoption Expense Tax Credit for eligible adoption expenses for the completed adoption of a child under the age of 18 years.

The following details about the credit are provided from the Department of Finance Canada.

Every year thousands of Canadian families adopt a child. Adoptive parents do not currently receive tax recognition of these exceptional costs attached to the decision to adopt a child, including adoption agency and legal fees. In the case of children who are adopted from outside of Canada, the range of costs often includes travel expenses, accommodation expenses, and document translation fees. The budget proposes to introduce a 16-per-cent non-refundable credit for eligible (non-reimbursable) adoption expenses for the completed adoption of a child under the age of 18 years.

Eligible adoption expenses will include:

  • Fees paid to an adoption agency licensed by a provincial or territorial government.
  • Court, legal and administrative expenses.
  • Reasonable travel and living expenses for the child and the adoptive parents.
  • Document translation fees.
  • Mandatory fees paid to a foreign institution.
  • Any other reasonable expenses required by a provincial or territorial government or an adoption agency licensed by a provincial or territorial government.

The maximum eligible adoption expenses claimable in respect of any particular adoption will be $10,000. This amount will be indexed for taxation years after 2005. The credit may be split between two adoptive parents, but the combined expenses claimed for an adopted child cannot exceed $10,000. To be eligible for the credit, a parent must submit proof of an adoption in the form of a Canadian or foreign adoption order, or otherwise demonstrate that all of the legal requirements of the jurisdiction in which the parent resides have been met in completing the adoption. Parents will be able to claim the credit only for the taxation year in which an adoption is finalized, and will be able to include expenses incurred from the earlier of the time the child’s adoption file is opened with the provincial or territorial ministry responsible for adoption or a licensed adoption agency, and the time, if any, that an application related to an adoption is made to a Canadian court.

This measure will be effective as of the 2005 taxation year, and is estimated to reduce federal revenues by $5 million per year.

Contact your local Canada Revenue Agency Office for more information.