Tax guide

Adoption Credit

Adopting a child is a long, difficult and sometimes expensive process. But 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 don’t use for up to five years.

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

The Adoption Credit

The Adoption Credit has a maximum value of $14,080 (for tax year 2019). 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 related expenses.

A qualifying adoptee must be one of the following:

  • A child who is a U.S. citizen or resident (including U.S. territories) when 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

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 must wait until the adoption is final before claiming the credit.

The total value of the credit begins dropping when your modified adjusted gross income (MAGI) is $211,160, and phases out completely when your MAGI exceeds $251,160.

Special Needs Adoption

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

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

  • The child must be a U.S. citizen or resident when the adoption process begins.
  • A state (including the District of Columbia) must have determined that the child should not and cannot return to their parent’s home.
  • A state has determined that the child will not be adopted unless financial assistance is provided.

Claiming the Credit

To claim the adoption credit, just add Form 8839 – Qualified Adoption Expenses to your return. Our interview will help you add the form.

Also see:
Child Tax Credits
Child and Dependent Care


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