Do I only have a child benefit entitlement for my biological children?

No. Child benefit entitlement exists for the applicant's biological children and also for their adopted children. You can apply for child benefit for foster children if they live in your family and there is a permanent relationship of supervision, care, and upbringing. Furthermore, the custody and care relationship with the biological parents must no longer exist. Occasional visits from the biological parents are harmless. If you have taken siblings into your household, you are entitled to child benefit if they can be equated with foster children.

Child benefit is also paid if a stepchild or grandchild lives in your household. In these cases, however, there is no child relationship in the sense of tax law. Therefore, step- or grandparents are not automatically entitled to a child allowance, but only if the biological parents transfer the child allowances to the new guardians in Form K. If no other person is entitled to receive child benefit for orphans or children who do not know where their parents are, the children themselves can receive the child benefit. They then receive the amount that would be due to them for their own first child.

If you, as parents, have given a child up for adoption, the child relationship between you and the child ends at that point. At the same time, your entitlement to child benefit and tax allowances also ends.

For a child you have taken into your household with the intention of adopting, you can receive child benefit even before the adoption, as there is usually a foster relationship.

(2023): Do I only have a child benefit entitlement for my biological children?

What relationship must exist with the child for them to be considered for tax purposes?

For tax purposes, a child relationship must exist. This applies to children who are directly related to you or your foster children.

A direct relationship exists with legitimate and illegitimate biological children as well as adopted children. When a minor child is adopted, the child loses their relationship with their biological parents.

Foster children are considered if they live in your household and are integrated into your family. Additionally, there must be no custody and care relationship between the foster child and their biological parents.

Grandchildren and stepchildren are not considered for the child allowance, education allowance, and allowance for care, education, or training (BEA allowance). However, this can be circumvented by transferring the allowance. For this, the biological parents must give their consent.

(2023): What relationship must exist with the child for them to be considered for tax purposes?

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).

(2023): Are adoption costs tax-deductible?