(2023) Are adoption costs tax-deductible?

Under previous legislation, adoption costs were not deductible as extraordinary expenses under Section 33 of the Income Tax Act. This is because an adoption is "not unavoidable for legal, factual, or moral reasons, but is based on free will not determined by external factors" (BFH ruling of 13.3.1987, III R 301/84). And this remains the case. However, there was once hope for a change.

• In 2012, the VI Senate of the BFH, responsible for extraordinary expenses since 2009, wanted to change the case law and recognise adoption costs, but the previously responsible III Senate did not agree.
• In 2013, the VI Senate referred the question to the Grand Senate as to whether, in the event of an intended change in case law, there is really an obligation to obtain approval from the Senate whose previous decision is to be deviated from (BFH decision of 18.4.2013, VI R 60/11).
• In 2014, the Grand Senate of the Federal Fiscal Court answered the inquiry by stating that a change in case law requires the approval of the previous Senate if it is still dealing with this issue. If approval is refused, the Grand Senate must provide clarification (BFH decision of 9.10.2014, GrS 1/13).
• In 2015, the VI Senate of the BFH resignedly refrained from calling on the Grand Senate and frustratedly confirmed the previous case law of the III Senate: adoption costs are not recognised as extraordinary expenses under Section 33 of the Income Tax Act. This also applies to "expenses incurred by a couple due to the adoption of a child in the case of organically caused sterility of one partner" (BFH ruling of 10.3.2015, VI R 60/11).
• Although a constitutional complaint was filed against this ruling with the Federal Constitutional Court, the court did not accept the complaint for decision due to lack of prospects of success. Thus, it remains the case: Adoption costs are unfortunately not tax-deductible. This decision deeply disappointed the hopes of many parents. Objections to tax assessments that had previously been suspended due to the pending proceedings will now be rejected (BVerfG decision of 13.6.2016, 2 BvR 1208/15).