Adoption Credit

What is the Adoption Credit? 

Along with all the other tax breaks for parents, the Adoption Credit can help ease the financial stress of adding a new child to your family. 

The Adoption Credit is a nonrefundable tax credit. That means it can’t give you a refund by itself, but it does take a good chunk off the top of your tax liability. So much, in fact, that you probably won’t even be able to use up all the credit in one year. Good news: You can roll over what you haven’t used for up to five years. 

Now, let’s take a look at how this credit helps adopting parents. 

How much is the Adoption Credit worth? 

The Adoption Credit has a maximum value of $16,8100 (for tax year 2024). Why a maximum? If your adoptions costs are less than the maximum, what you actually paid is your maximum credit (unless it’s a special needs adoption – see below). And the total is not just for one year’s expenses, but your total for the adoption, which can span years. 

The credit offsets qualified adoption expenses, such as court costs, attorney fees, traveling expenses (meals and lodging), and other directly related expenses. 

What are the adoptee requirements for the Adoption Credit? 

A qualifying adoptee must be one of the following: 

• A child who is a U.S. citizen or resident (including U.S. territories) before the adoption process begins 

• A child who is not a U.S. citizen when the adoption process begins 

• A child under the age of 18 or who is physically or mentally unable to care for themselves 

When can I claim the Adoption Credit? 

If you’re adopting a U.S. citizen or resident, you must wait one year before claiming the credit for qualifying expenses. Starting the adoption process this year means you claim any qualified expenses on next year’s return. 

If you are adopting a child who is not a U.S. citizen or resident, you can claim the credit for the tax year in which the adoption was finalized. 

What are the phaseout amounts for the Adoption Credit? 

The total value of the credit begins dropping when your modified adjusted gross income (MAGI) is $252,150 and is phased out completely when your MAGI exceeds $292,150. 

How does the Adoption Credit work for special needs children? 

If you’re adopting a special needs child, you may be entitled to the full credit even if you have little or no out-of-pocket costs. 

For a special-needs child, certain eligibility requirements must be met: 

• The child must be a citizen or resident of the United States or its possessions when the adoption effort began 

• A state must determine that the child cannot be or should not be returned to his or her parents’ home 

• The state must determine that the child probably won’t be adoptable without assistance provided to the adoptive family 

Claiming the Adoption Credit with 1040.com is simple—just use our tax-filing walkthrough. 

To claim the Adoption Credit, just add Form 8839, Qualified Adoption Expenses, to your 1040.com return. Our interview will help you add the form, and you’ll be ready to maximize your refund for our flat tax-filing rate. Just sign up or log in to get started.