The Adoption Tax Credit: Helping Families with Adoption-Related Expenses

As a tax professional, it’s important to inform my clients about the benefits available to them. One such benefit is the adoption tax credit, which can be a significant help to families who have gone through the adoption process. In this article, I’ll provide a comprehensive overview of the adoption tax credit and what taxpayers need to know about it.

What is the Adoption Tax Credit?

The adoption tax credit is a federal tax credit designed to help families offset the costs associated with adopting a child. The credit is available to families who have adopted a child during the 2022 tax year and can be claimed for up to $14,890 in eligible adoption expenses for each eligible child. The credit applies to international, domestic, private, and public foster care adoptions, making it a broad benefit that can help many families.

Claiming the Adoption Tax Credit

To claim the adoption tax credit, taxpayers must complete Form 8839, Qualified Adoption Expenses and attach it to their tax return. The form is used to calculate the amount of credit that the taxpayer is eligible to claim. There are income limits that can affect the amount of credit that a taxpayer is eligible to claim, so it’s important to be aware of these limits when preparing your tax return.

It’s also important to note that the adoption tax credit is non-refundable, meaning it will reduce your tax bill but won’t result in a refund, even if the credit amount is greater than your tax bill. However, any unused credit can be carried forward and applied to future tax returns for up to five years, providing a long-term benefit for families.

Who is Considered an Eligible Child?

An eligible child is defined as an individual who is under the age of 18 or is physically or mentally incapable of caring for themselves. This definition covers a wide range of children and provides a comprehensive benefit for families who are adopting.

Qualified Adoption Expenses

Qualified adoption expenses include adoption fees, court costs, legal fees, adoption-related travel expenses (such as meals and lodging), and other expenses directly related to the legal adoption of an eligible child. It’s important to note that expenses may be deductible even if the taxpayer pays them before an eligible child is identified. For example, some future adoptive parents may pay for a home study at the beginning of the adoption process, and these fees can be claimed as qualified adoption expenses.

It’s also important to note that expenses paid to adopt a spouse’s child are not considered qualified adoption expenses. However, expenses paid by a registered domestic partner may be deductible if the partner lives in a state that allows a same-sex second parent or co-parent to adopt their partner’s child.

In conclusion, the adoption tax credit provides a significant benefit for families who have gone through the adoption process. It’s a broad benefit that can help offset the costs associated with adoption and provide long-term financial support for families. If you have any questions about the adoption tax credit or how to claim it, please don’t hesitate to reach out to a tax professional for assistance.

Reference:

https://www.irs.gov/forms-pubs/about-form-8839

https://www.irs.gov/taxtopics/tc607