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 when the biological parents transfer the child allowances to the new guardians in Form K. If orphans or children who do not know where their parents are have no other person entitled to receive it, 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 time. Your entitlement to child benefit and tax allowances also ends at the same time.
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.
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 child relationship with their biological parents.
Foster children are considered if they live in your household and have been 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.
What relationship must exist with the child for them to be considered for tax purposes?
Can adoption costs be deducted to reduce tax?
Adoption costs cannot be deducted as exceptional expenses under the current legal framework according to § 33 EStG. This regulation is based on the consistent case law of the Federal Fiscal Court (BFH), which holds that adoption is a conscious, voluntary decision and not a compulsory necessity.
Historical development of case law:
- Previous legal situation (1987): The BFH ruled as early as 1987 that adoption costs are not deductible as exceptional expenses because adoption is not considered "unavoidable" but is based on a voluntary decision (BFH ruling of 13.3.1987, III R 301/84).
- Attempt to change (2012): In 2012, the VI Senate of the BFH wanted to change the case law and recognise adoption costs, but this failed due to the resistance of the responsible III Senate. An attempt to reach a final clarification by the Grand Senate in 2013 was unsuccessful.
- Confirmation of the old case law (2015): In 2015, the VI Senate of the BFH confirmed the previous case law and ruled that adoption costs are still not deductible as exceptional expenses, even if the adoption is related to an organically caused sterility of one partner (BFH ruling of 10.3.2015, VI R 60/11).
- Constitutional complaint: A constitutional complaint was lodged against this ruling with the Federal Constitutional Court (BVerfG), but it was not accepted for a decision due to lack of prospects of success (BVerfG decision of 13.6.2016, 2 BvR 1208/15). Thus, it remains final: adoption costs are not tax-deductible.
Current case law:
Current ruling (2024): In 2024, the Münster Finance Court again ruled that adoption costs do not constitute exceptional expenses (FG Münster, ruling of 25.6.2024, 14 K 1085/23 E). In this case, the plaintiffs had adopted two children born abroad and claimed the adoption costs as exceptional expenses. They argued that the costs had arisen out of necessity, as they had previously undergone unsuccessful fertility treatment. However, the Finance Court and the tax office dismissed the claim, emphasising that adoption is not a medical treatment and the decision to adopt is always based on free will, even after unsuccessful fertility treatment.
Reasoning:
- Not medical expenses: The BFH has repeatedly clarified that adoption costs are not considered medical expenses, as there is no medical necessity for adoption. Adoption is not a medical treatment and is not subject to medical guidelines.
- Voluntary decision: The decision to adopt, even after unsuccessful fertility treatment, is based on a voluntary decision and is not a compulsory consequence of infertility.
Conclusion:
Adoption costs are not tax-deductible under current law and case law. Even in cases of involuntary childlessness or previous unsuccessful fertility treatment, adoption remains a voluntary decision and is therefore not recognised for tax purposes as an exceptional expense.
Can adoption costs be deducted to reduce tax?
