Adopting Refugee Children: Adoption Expenses Qualify as Tax Credit

It has been truly heartbreaking to watch the humanitarian crisis unfold in Europe, as millions of displaced refugee families risk their lives seeking safe havens. Canadians can help with charitable donations, but also by adopting orphaned children.

Revisiting the tax rules governing this credit will help advisors facilitate discussions on proactive adoption plans their clients may be contemplating. 

What is the amount that can be claimed? For 2015, the claim is the lesser of the allowable expenses and $15,255. The maximum claim is indexed annually. The claim must be made in the year that the adoption period ends.

The adoption period is the period that begins when the adoptive parent makes an application to register with a licensed adoption agency or province, or the time the application is made to a Canadian court, whichever is earlier; and ends at the time the file is acknowledged by the Canadian government, or the moment the child begins to reside with the adopted parents, whichever is later.

Who is an Eligible Child? An eligible child for whom the credit is to be claimed is an individual who has yet to turn 18 years old at the time the adoption file is acknowledged by the Canadian government. Unfortunately, the claim works only if the parent or parents are taxable. There are no provisions for carrying over expense claims to another year where the parent is not taxable.

Who can make the claim for Adoption Expenses? Either parent may claim the costs of adopting a child, or they may split the claim so long as no more than the maximum claim is made.

What Adoption Expenses can be claimed? Allowable expenses include:

• fees paid to a provincially or territorially licensed adoption agency
• court, legal and administrative expenses
• reasonable travel and living expenses for the child and adopting parents
• document translation fees
• mandatory fees paid to a foreign institution
• any other reasonable expenses required by a provincial or territorial government or a licensed adoption agency

The Money Moral. The tax system provides financial relief through non-refundable credits for charitable donations but also for the significant costs of adoption. It’s important to save all documents and receipts in your adoption journey and speak to a Tax Services Specialist to get the best after-tax results from your expenditures.

Evelyn Jacks is President of Knowledge Bureau and author of 52 books on personal tax and family wealth management, the most recent of which is Family Tax Essentials.