CLAIMING YOUR ADOPTED CHILD AS A DEPENDENT
Updated: Jun 8, 2021
Qualifying child example: We took our baby into our home last year in October. that means she lived with us less than 6 months of the year but she was born last year so under the IRS rules she is considered living with us for 6 months because it was the year of her birth.
Adoption Tax Problem #1 we don't know her birth name or SSN. to solve this problem we need to file form W7-A to the IRS to get a temporary SSN (ATIN) to claim her as a dependent on our taxes. This takes 4-8 weeks to process. Do this as soon as you bring your baby home!
2018- Your child does NOT qualify as a dependent with an ATIN because it is not a government SSN. Never mind if your child was born in this country and is already a US citizen. Your child is now an OTHER DEPENDENT and only qualifies for a $500 refund instead of the $2000 refund for children with SSN's. You CANNOT back-file with a 1040x after you obtain your child's SSN at a later time to claim the credit.
Thank the Trump administration for this one!
2017- Your child qualifies as a dependent with an ATIN. Claiming a child as dependent using an ATIN means that you reduce your taxable income by an additional standard deduction of $4050. ex: instead of reducing your AGI (taxable income) by 2x4050 for you and your husband, you will reduce by 3x4050. in our case this adds up to an actual savings of (approximately $1,000 in 2017)
DON'T FORGET: As soon as your adoption is final, you need to apply for a NEW SSN for your child. When you receive the SSN in the mail you can claim your child as a dependent on your federal taxes without being subjugated to any further penalty.