IRS Definitions and Explanations, Page 5

How To Take the Credit or Exclusion

You must file Form 8839 with either Form 1040 or Form 1040A to take the credit or exclusion. You should maintain records to support any adoption credit or exclusion claimed.

Married persons.

If you are married, you must file a joint return to take the adoption credit or exclusion.

However, you are not considered married if you are legally separated under a decree of divorce or separate maintenance. In that case, you can take the credit or exclusion on a separate return.

Married and living apart.

You can also take the credit or exclusion on a separate return if all of the following statements are true.

You lived apart from your spouse for the last six months of the tax year.
Your home is the eligible child's home for more than half the year.
You pay more than half the cost of keeping up your home for the year.

Child's identifying number.

You must provide an identifying number for the child on line 1, column (f), of Form 8839. Use whichever of the following numbers is appropriate.

A social security number (SSN) if the child has one or you will be able to obtain one intime to file your tax return. Apply for an SSN on Form SS–5.
An individual taxpayer identification number (ITIN) if the child is a resident or nonresident alien and not eligible for an SSN. Apply for an ITIN on Form W–7.
An adoption taxpayer identification number (ATIN) if you are in the process of adopting achild who is a U.S. citizen or resident and cannot get an SSN for the child intime to file your return. Apply for an ATIN on Form W–7A.

If you are not sure whether the child is eligible for a social security number, contact your local Social Security Administration office or call 1–800–772–1213. If you need information about Form W–7 or Form W–7A, contact your local IRS office or call 1–800–829–1040.

Special Rule for Adopting a Child With Special Needs

Beginning in 2004, the maximum credit and exclusion, subject to the income and tax liability limits discussed earlier, will be allowed for the adoption of a child with special needs even if you do not have any qualifying expenses. For 2006,the maximum amount for each is $10,960.

Child with special needs. An eligible child is a child with special needs if he or she is a citizen or resident of the United States (including U.S. possessions) and a state determines that the child cannot or should not be returned to his or her parents' home and probably will not be adopted unless adoption assistance is provided to the adoptive parents. Factors used by states to determine if a child has special needs could include:

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

If your state has determined that the child you are adopting is a child with special needs, you should keep evidence of that factfor your records.

Credits: U.S. Internal Revenue Service