The Adoption Tax Credit

By / August 8, 2024

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

 

Table of Contents

  1. What is the Adoption Tax Credit?
  2. Claiming the Adoption Tax Credit
  3. Who is Considered an Eligible Child?
  4. Qualified Adoption Expenses
  5. Conclusion
  6. Sources

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. For the 2022 tax year, the credit can be claimed for up to $14,890 in eligible adoption expenses for each eligible child. This credit applies to international, domestic, private, and public foster care adoptions, making it accessible to 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. This form calculates the amount of credit that the taxpayer is eligible to claim.

Income Limits

There are income limits that can affect the amount of credit a taxpayer can claim. For the 2022 tax year, the adoption credit begins to phase out for taxpayers with modified adjusted gross incomes (MAGIs) above $223,410 and is completely phased out at $263,410.

Non-Refundable Credit

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 exceeds your tax bill. However, any unused credit can be carried forward and applied to future tax returns for up to five years, providing long-term benefits 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 self-care. This broad definition ensures that many adopted children qualify for the credit.

Qualified Adoption Expenses

Qualified adoption expenses include:

  • Adoption fees
  • Court costs
  • Legal fees
  • Adoption-related travel expenses (such as meals and lodging)
  • Other expenses directly related to the legal adoption of an eligible child

Timing of Expenses

Expenses may be deductible even if paid before an eligible child is identified. For instance, fees for a home study at the beginning of the adoption process can be claimed as qualified adoption expenses.

Non-Qualified Expenses

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.

Conclusion

The adoption tax credit provides significant financial relief for families who have gone through the adoption process. By offsetting the costs associated with adoption, this credit offers long-term support to families. If you have any questions about the adoption tax credit or need assistance with claiming it, please reach out to a tax professional.

Sources

Scroll to Top