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Benefits

IRS Releases 2018 Form 8839 for Excluding Employer-Provided Adoption Benefits

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IRS Form 8839 (Qualified Adoption Expenses) and Instructions (2018)

Form 8839

Instructions

The IRS has released the 2018 version of Form 8839 (Qualified Adoption Expenses), as well as updated instructions. Taxpayers use Form 8839 to claim the adoption credit, an exclusion for employer-provided adoption benefits, or both. There are a few noteworthy changes to the 2018 form and instructions, as follows:

  • The maximum adoption credit and exclusion amounts have been adjusted to reflect their 2018 values ($13,810 per eligible child). Both the credit and exclusion begin to be phased out for individuals with modified adjusted gross incomes greater than $207,140 and are phased out entirely for individuals with modified adjusted gross incomes of $247,140 or more.
  • The adoption credit carryforward worksheet in the instructions for line 16, which identifies unused credits that taxpayers may carry forward to 2019, has been modified to reflect that carryforwards to 2019 cannot include 2013 credit carryforwards. [EBIA Comment: Excess credits can be carried forward no more than five years; thus, 2018 is the last year that 2013 credit carryforwards can be used.]
  • Minor changes have been made to reflect revisions to IRS Forms 1040 and 1040NR for 2018.

EBIA Comment: Employer-provided adoption benefits may be excluded from an employee’s gross income if they are furnished pursuant to an adoption assistance program that meets the Code’s requirements. Benefits under a qualified adoption assistance program may be funded by the employer directly, by employees through salary reductions under a cafeteria plan, or by a combination of both. Employees may also claim a tax credit for qualified adoption expenses, although the credit and the exclusion may not both be claimed for the same expense. For more information, see EBIA’s Fringe Benefits manual at Section III (“Qualified Adoption Assistance Programs”).

Contributing Editors: EBIA Staff.

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