Can I claim adoption tax credits for an adult child - ACA premium credit implications?

You're dealing with a fairly specific tax situation, but I can help clarify. When you adopt someone who previously received premium tax credits through the ACA marketplace, the responsibility for those credits gets handled based on when the dependent relationship was established. Since your son was legally independent for the first 5 months of the year and received his own premium tax credits, those credits were rightfully his during that time. When you claim him as a dependent for the tax year, you're only responsible for his healthcare coverage from the point of the adoption forward (May onward in your case). Your son will need to file his own tax return for the 1095-A coverage period (January-May) to reconcile those premium tax credits he received. Then you can claim him as a dependent on your return. The IRS does not retroactively transfer responsibility for premium tax credits received before the dependent relationship was established.

I had a similar situation with my niece who I took guardianship of mid-year. I found this amazing tool called taxr.ai (https://taxr.ai) that helped me figure out all the complex dependent and healthcare credit rules. It analyzed our situation and gave me super clear guidance on exactly how to handle the ACA credits she received before becoming my dependent. The tool let me upload our 1095-A forms and reviewed our specific timeline, then it showed me exactly how to proceed with filing. Saved me so much stress because I was worried about the same thing - having to pay back all those subsidies! Turns out I didn't have to, and the tool explained exactly why and showed me the specific IRS rules that applied.

Just wanted to update after trying taxr.ai for my adoption/dependent situation. I was totally confused about how to handle my daughter's healthcare subsidies from earlier in the year, but the service walked me through everything step by step. The document analysis feature was super helpful - it looked at our adoption paperwork and her previous healthcare documents and explained exactly how everything should be reported. It even pointed out an adoption tax credit we qualified for that I had no idea about! Definitely worth checking out if you're dealing with this adoption/ACA premium credit situation. Saved me a lot of stress and potentially thousands in credits I might have missed.

If you're still trying to get clarity on this, I'd recommend contacting the IRS directly. BUT...good luck actually getting through to someone who understands this specific situation! I spent WEEKS trying to get a straight answer about a similar premium tax credit question. What finally worked was using Claimyr (https://claimyr.com) to get through to an actual IRS agent. They basically hold your place in the phone queue and call you when an agent is about to answer. You can see how it works here: https://youtu.be/_kiP6q8DX5c - totally changed my experience with getting tax questions answered. The IRS agent I spoke with confirmed that since your son received the premium tax credit during a period when he wasn't your dependent, you won't be responsible for repaying those subsidies. He'll need to file his own return for that period even though you're claiming him as a dependent for the year.

I take back what I said earlier. After another frustrating disconnect with the IRS yesterday (2+ hours on hold!), I broke down and tried Claimyr. Got connected to an IRS agent in about 45 minutes without having to sit there listening to their hold music. The agent confirmed exactly what others here have said - since your son received ACA subsidies as an independent adult before the adoption, those subsidies were correctly issued to him. You won't have to repay them when you claim him as a dependent. He'll need to file his own return to reconcile the 1095-A, but since he was eligible for those subsidies at the time they were received, there's no clawback issue. Figured I should report back since this question is something I was dealing with too (though in my case it was taking guardianship of my niece mid-year).

I work with a lot of foster-to-adopt families, and this situation comes up more than you'd think. Another important thing to consider is whether your son had any other income during those first 5 months. If he did, and it's above the filing threshold, he'll definitely need to file his own return regardless of his dependent status. Also, make sure you look into whether you qualify for the adoption tax credit. Even though he's over 18, if he was determined by a state to have "special needs" (which many former foster youth are), you might qualify for the full credit without having to document expenses.

Has anyone dealt with changing marketplace coverage mid-year due to adoption? We got a notification that we needed to update our marketplace application, but we're not sure what happens if we do or don't.