Taken from The Complete Adoption Book by Laura Beauvais-Godwin.
"The adoption tax credit is perhaps the greatest financial incentive for adoptive families. You can now earn up to $10,160 in tax credit on your federal taxes for each child who you adopt. A tax credit is not the same as a tax deduction; a credit is far more generous.
"Qualified expenses include adoption fees, court costs, attorney's fees, and other adoption-related expenses such as travel. For example, if you paid $15,000 in adoption expenses in 2005, the adoption was finalized that year, and you paid $5,000 in federal income tax for 2005, then when you file your 2005 taxes, you will receive a $5,000 refund. The following year, you can receive a refund up to the total amount you paid in taxes until you reach the tax credit total of $10, 160. If you adopt two children in one year, then you are eligible for a $20,320 tax credit"(p. 338).
How to Take a Credit
"You must file form 8839 with your federal income tax return (1040 or 1040A) in order to receive the credit or exclusion. If you are married, you must file a joint return. Also, you must provide the child's identifying number on form 8839. If your child does not have a Social Security number and is not eligible for one, apply for an individual taxpayer identification number on form W-7A. You can also apply, using form W-7A, for an adoption taxpayer identification number for U.S.-born children who are in the process of being adopted" (p. 339).