Special Needs Adoption Tax Credit (ATC)

The deadline to file a claim for this tax credit for fiscal year 2022 expired on April 18, 2022.


Purpose

January 1, 2000 and before January 1, 2022

  • Provides a credit to assist in the nonrecurring adoption expenses for a special needs child that is a resident or ward of a resident of the state of Missouri.

Beginning on January 1, 2022

  • Provides a credit to assist in the nonrecurring adoption expenses for residents of Missouri who proceed in good faith with the adoption of a child regardless of whether the child is a resident of the state.

Eligible Applicants

January 1, 2000 and before January 1, 2022

  • Any person residing in this state that legally adopts a special needs child who is a resident or ward of a resident of this state at the time the adoption is initiated is eligible to receive a tax credit up to $10,000 for nonrecurring adoption expenses for each child.
  • Any business entity providing funds to an employee to legally adopt a special needs child who is a resident or ward of a resident of this state at the time the adoption is initiated may be eligible to receive a credit of up to $10,000 for nonrecurring adoption expenses for each child.

Beginning on January 1, 2022

  • Any person residing in this state who proceeds in good faith with the adoption of a child, regardless of whether such child is a special needs child, shall be eligible to receive a tax credit of up to $10,000 for nonrecurring adoption expenses for each child.
  • Any business entity providing funds to an employee to enable that employee to proceed in good faith with the adoption of a child, regardless of whether such child is a special needs child, shall be eligible to receive a tax credit of up to $10,000 for nonrecurring adoption expenses for each child.

Eligible Activities

January 1, 2000 and before January 1, 2022

  • The child must be a special needs child who is a resident or ward of a resident of this state at the time the adoption is initiated as determined by the Department of Social Services, Children's Division, a child-placing agency licensed by the state, or by a court of competent jurisdiction.

Beginning January 1, 2022

  • The tax credit shall be allowed regardless of whether the child adopted is a resident or ward of a resident of this state at the time the adoption is initiated; however, priority shall be given to applications to claim the tax credit for special needs children who are residents or wards of residents of this state at the time the adoption is initiated. 
  • The child must be a special needs child who is a resident or ward of a resident of this state at the time the adoption is initiated as determined by the Department of Social Services, Children's Division, a child-placing agency licensed by the state, or by a court of competent jurisdiction.

How the Program Works

  • To claim the Adoption Tax Credit, the parent, or their employer if the employer is claiming the full credit, must complete Form MO-ATC.
  • The claimant must attach a copy of the completed Form MO-ATC along with the tax return the first year the credit is being claimed.
  • Up to 50 percent of any tax credit earned for a resident adoption may be claimed upon placement of the child and the remaining 50 percent claimed after the adoption is final.

Eligible Use of Tax Credit

During the year of the adoption, or any year to which the credit is carried forward, the credit will be reduced by the state's cost of providing care, treatment, maintenance, and services when the child is placed, with no intent to return to the adoptive home, in foster care or residential treatment licensed or operated by the Department of Social Services, Children's Division, the Division of Youth Services, or the Department of Mental Health, or when a juvenile court temporarily or finally relieves the adoptive parents of custody of the child.

Carry Forward Provisions

Any amount of tax credit which exceeds the tax due may be carried forward to the next four subsequent years, not to exceed a total of five years.

Authorization

  • This tax credit may be applied to adopting parents' or the qualifying business' state income tax, corporation income tax, fiduciary tax, or any other tax incurred under the provisions of Chapter 143, RSMo excluding state withholding tax.
  • This credit may be assigned, sold, or transferred. When first claiming the credit as the result of a sale or assignment, attach a statement signed by the seller including the names, addresses, phone numbers, and social security numbers of the buyer and seller, the date the credit was sold, and a copy of the original Form MO-ATC completed by the adoptive parents. Any sale of the adoption tax credit shall be at a discount rate of seventy-five percent or greater of the amount sold.

Funding Limits and Due Dates

  • Returns claiming Adoption Tax Credit must be filed July 1 through April 15 of each fiscal year.
  • Beginning July 1, 2021, the total amount available for the Adoption Tax Credit is $6,000,000 in any one fiscal year.
  • All claims will be held until after all returns received on April 15 have been processed to determine if the total amount claimed exceeds $6,000,000. If claims exceed $6,000,000, the Department will apportion credits in an equal ratio among all valid returns filed.
    • Priority shall be given to applications to claim the tax credit for special needs children who are residents or wards of residents of this state at the time the adoption is initiated.
  • Missouri Revised Statutes 135.325 through 135.339 do not provide provisions to waive interest and penalties due to the apportionment of the Adoption Tax Credit.
    • If your return would result in a balance due without considering the application of the food pantry tax credit, the Department recommends paying the amount of tax covered by the food pantry tax credit by the return due date to avoid the accrual of interest and penalties on the unpaid tax. Once the food pantry tax credit is apportioned for the fiscal year, any amount of payment not due to the Department will be refunded to the taxpayer.
    • If your return would result in a refund without consideration of the application of the food pantry tax credit, the Department will issue a partial refund for the amount overpaid in excess of the food pantry tax credit. Once the food pantry tax credit is apportioned and allowed, any additional payments or credits that are overpaid will be refunded to you in a separate check at a later date.
  • If the Adoption Tax Credit is reduced because of apportionment, an amended return may be filed on or after July 1 to be considered for the following fiscal year beginning July 1, or the credit may be carried forward to the next year's tax return. Amended returns may be filed until the credit is exhausted or the carryforward period has been exhausted.

Forms

Contact Missouri Department of Revenue, Taxation Division: