A child must meet all of the following criteria to qualify as a special needs child for the purposes of the federal Adoption Credit:
- First, the child must be a U.S. citizen or resident or its possessions when the adoption process began;
- The state (including Washington DC) must determine that a child can’t or shouldn’t be returned to their biological parents; and
- The state must also determine that the child likely won’t be adopted without additional assistance offered to the adopting family.
For the adoption of special needs children, if your employer has a written qualified adoption assistance program, you may be eligible for the exclusion, even if you or your employer didn't pay any qualified adoption expenses.