General Instructions

Changes To Note

• Adoption Credit. The maximum credit has been increased to $10,000 per child. The credit is allowed only if your modified adjusted gross income (AGI) is less than $190,000.
• Employer-Provided Adoption Benefits. The maximum exclusion for employer-provided adoption benefits has been increased to $10,000 for each eligible child. The exclusion is allowed only if your modified AGI is less than $190,000.

Purpose of Form

Use Form 8839 to figure the amount of your adoption credit. You may be able to take the credit if you paid qualified adoption expenses in:

• 2001 or
• 2002 and the adoption became final in or before 2002.

You may also be able to take the credit if:

• You paid expenses after 1996 in connection with the adoption of an eligible foreign child and the adoption became final in 2002. See the instructions for line 1, column (e).
• You have a carryforward of an adoption credit from a prior year.

Use Part III of Form 8839 to figure the amount of any employer-provided adoption benefits you may exclude from your income on line 7 of Form 1040 or 1040A if:

• You received these benefits in 2002. However, special rules apply for benefits received in connection with the adoption of an eligible foreign child. See the instructions for line 1, column (e).
• You received these benefits after 1996 in connection with the adoption of an eligible foreign child and the adoption became final in 2002. See the instructions for line 1, column (e). You must complete Part III of Form 8839 before you can figure the credit, if any, in Part II.

Definitions

Eligible Child

An eligible child is:

• Any child under age 18. If the child turned 18 during the year, the child is an eligible child for the part of the year he or she was under age 18.
• Any disabled person unable to care for himself or herself.

If you and another person (other than your spouse if filing jointly) adopted or tried to adopt an eligible child, see the instructions for line 2 (or line 19 if applicable) before completing Part II (or Part III if applicable).

Employer-Provided Adoption Benefits

Employer-provided adoption benefits are amounts your employer paid directly to either you or a third party for qualified adoption expenses. Your salary may have been reduced to pay for these benefits. These benefits should be shown in box 12 of your Form(s) W-2 with a code T.

Qualified Adoption Expenses

Qualified adoption expenses are reasonable and necessary expenses directly related to, and for the principal purpose of, the legal adoption of an eligible child.

Qualified adoption expenses include:

• Adoption fees.
• Attorney fees.
• Court costs.
• Travel expenses (including meals and lodging) while away from home.

Qualified adoption expenses do not include expenses:

• For which you received funds under any state, local, or Federal program.
• That violate state or Federal law.
• For carrying out a surrogate parenting arrangement.
• For the adoption of your spouse's child.
• Paid or reimbursed by your employer or any other person or organization.
• Paid before 1997.
• Allowed as a credit or deduction under any other provision of Federal income tax law.

Who May Take the Adoption Credit or Exclude Employer-Provided Adoption Benefits?

You may take the credit or exclusion if all three of the following apply.

1. Your filing status is single, head of household, qualifying widow(er) with dependent child, or married filing jointly. If your filing status is married filing separately, see Married Persons Filing Separate Returns below.
2. Your modified AGI is less than $190,000. To figure your modified AGI, see the instructions for line 8 (for the credit) or line 26 (for the exclusion).
3. You report the required information about the eligible child in Part l.

Married Persons Filing Separate Returns

You may take the credit or exclusion if you meet items 2 and 3 listed above and all of the following apply.

• You lived apart from your spouse during the last 6 months of 2002.
• The eligible child lived in your home more than half of 2002.
• You provided over half the cost of keeping up your home.

Specific Instructions

Part I - Information About Your Eligible Child or Children Line 1

Complete all columns that apply to the eligible child you adopted or tried to adopt. If you do not give correct or complete information, your credit and any exclusion may be disallowed.

If you cannot give complete information because you tried to adopt an eligible child but were unsuccessful or the adoption was not final by the end of 2002, complete the entries you can on line 1. Enter See Page 2 in the columns for which you do not have the information. Then, on the bottom of page 2, enter the name and address of any agency or agent (such as an attorney) that assisted in the attempted adoption.

Child 1 or Child 2

If you made more than one attempt to adopt one eligible child, combine the amounts you spent and complete only the Child 1 line. Do not report the additional attempt(s) on the Child 2 line. Complete the Child 2 line only if you adopted or tried to adopt two eligible children.

If you filed Form 8839 for a prior year in connection with this adoption, enter your 2002 information on the same line (Child 1 or Child 2) that you used in the prior year.

More Than Two Eligible Children

If you adopted or tried to adopt more than two eligible children, fill in and attach as many Forms 8839 as you need to list them. Also, enter See Attached to the right of the Caution below line 1.

For Part II, fill in lines 2 through 6 for each child. But fill in lines 7 through 18 on only one Form 8839. The amount on line 7 of that Form 8839 should be the combined total of the amounts on line 6 of all the Forms 8839.

For Part III, fill in lines 19 through 22 and 24 for each child. But fill in lines 23 and 25 through 31 on only one Form 8839. The amount on line 23 of that Form 8839 should be the combined total of the amounts on line 22 of all the Forms 8839. The amount on line 25 of that form should be the combined total of the amounts on line 24.

Column (c)

Check this box if the child was born before 1984 and was disabled. A child is disabled if the child is physically or mentally unable to care for himself or herself.

Column (d)

Check this box if the child was a child with special needs. A child is a child with special needs if all three of the following apply.

1. The child was a citizen or resident of the United States or its possessions at the time the adoption process began.
2. A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home.
3. The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. Factors used by states to make this determination include:

• The child's ethnic background and age,
• Whether the child is a member of a minority or sibling group, and
• Whether the child has a medical condition or a physical, mental, or emotional handicap.

If you check the box in column (d), be sure to keep evidence of the state's determination in your records.

Column (e)

Check this box if the child was a foreign child. A child is a foreign child if he or she was not a citizen or resident of the United States or its possessions at the time the adoption process began.

Special Rules.   If you paid qualified adoption expenses after 1996 in connection with the adoption of a foreign child and the adoption became final in 2002, you may use the total expenses paid after 1996 in determining the amount to enter on line 5. Complete the Qualified Adoption Expenses Worksheet in the instructions for line 5. However, on line 5 of that worksheet, enter your total qualified adoption expenses from 1997 through 2001. If the adoption did not become final by the end of 2002, you cannot take the adoption credit for that child in 2002. If the adoption becomes final in a later year, you may be able to take a credit for the expenses in that year.

If you received employer-provided adoption benefits in 2002 in connection with the adoption of a foreign child and the adoption did not become final by the end of 2002, you must include the benefits in the total entered on Form 1040 or 1040A, line 7. Also, enter AB (adoption benefits) next to line 7. If the adoption becomes final in a later year, you may be able to exclude the benefits from your income in that year.

Exclusion of prior year benefits.   If you received employer-provided adoption benefits after 1996 in connection with the adoption of a foreign child and the adoption became final in 2002, you may be able to exclude part or all of those benefits from your 2002 income. To find out if you can, complete the following worksheet. You also must use the worksheet to complete Part III of Form 8839 and to figure any taxable benefits to enter on Form 8839, line 31.

If the adoption of more than one foreign child became final in 2002, complete lines 1 through 7 of the worksheet on the next page separately for each foreign child and use the combined totals to complete lines 8 through 13 of the worksheet.

Exclusion of Prior Year Benefits Worksheet (keep for your records)

1.	Enter the total 1997 through 2001 employer-provided adoption benefits you received for the adoption of the foreign child	1.
2.	Enter $5,000. If you and another person (other than your spouse if filing jointly) each received employer-provided adoption benefits after 1996 and before 2002 to adopt the same child, see instructions	2.
3.	Enter the smaller of line 1 or line 2	3.
4.	Enter the total 2002 employer-provided adoption benefits you received for the adoption of the foreign child	4.
5.	Add lines 3 and 4	5.
6.	Enter $10,000. If you and another person (other than your spouse if filing jointly) each received employer-provided adoption benefits in 2002 to adopt the same child, see instructions	6.
7.	Enter the smaller of line 5 or line 6 here and on Form 8839, line 19. If necessary, cross out the preprinted amount on line 19 and enter the result above the preprinted amount	7.
Next: Enter zero on Form 8839, line 20. On Form 8839, line 22, enter the total amount of employer-provided adoption benefits received in 1997 through 2002. On the dotted line next to line 22, enter PYAB and the total amount of benefits you received in 1997 through 2001. Complete Form 8839 through line 30. Then, complete lines 8 through 13 below to figure the amount of any prior year benefits you may exclude and the taxable benefits, if any, to enter on Form 8839, line 31.
8.	Is the amount on your 2002 Form 8839, line 30, less than the amount on Form 8839, line 23?
	No. Go to line 11.
	Yes. Subtract line 30 from line 23	8.
9.	Enter the total 1997 through 2001 employer-provided adoption benefits included on Form 8839, line 22, for all children	9.
10.	Taxable benefits. Subtract line 9 from line 8. If zero or less, enter -0-. Enter the result here and on Form 8839, line 31. If more than zero, also include this amount on line 7 of Form 1040 or 1040A. On the dotted line next to line 7, enter AB.	10.
11.	Enter the amount from Form 8839, line 30	11.
12.	Enter the total 2002 employer-provided adoption benefits included on Form 8839, line 22, for all children	12.
13.	Prior year excluded benefits. Subtract line 12 from line 11. If zero or less, stop; you can not exclude any of your prior year benefits	13.
Next. Figure the total you would enter on line 7 of Form 1040 or 1040A before you exclude the amount from line 13 above. Then, subtract the amount from line 13 above from that total. Enter the result on line 7 of Form 1040 or 1040A. On the line next to line 7, enter PYAB and the amount from line 13 above.

Line 2 of the worksheet.   The limit on employer-provided adoption benefits received after 1996 and before 2002 for the adoption of a foreign child that may be excluded from income is $5,000. If you and another person (other than your spouse if filing jointly) each received employer-provided adoption benefits to adopt the same child, the $5,000 limit must be divided between the two of you. You may divide it in any way you both agree. Enter your share of the $5,000 limit on line 2 of the worksheet above.

Line 6 of the worksheet.   The limit on employer-provided adoption benefits received in 2002 for the adoption of a foreign child that may be excluded from income is $10,000 (before reduction for any employer-provided adoption benefits received after 1996 and before 2002 for the adoption of that same child). If you and another person (other than your spouse if filing joinlty) each received employer-provided adoption benefits to adopt the same child, the $10,000 limit must be divided between the two of you. You may divide it in any way you both agree. Enter your share of the $10,000 limit on line 6 of the worksheet above.

Column (f)

Enter the child's identifying number. This may be a social security number (SSN), an adoption taxpayer identification number (ATIN), or an individual taxpayer identification number (ITIN).

To get an -

• SSN, use Form SS-5.
• ATIN, use Form W-7A.
• ITIN, use Form W-7.

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