Adopting a child can be expensive, with costs ranging from $15,000 to $70,000, depending on where you live and the type of adoption (domestic or international). Expenses may include attorney fees, travel, and lodging.
The adoption tax credit helps cover IRS-qualified adoption expenses. For the 2024 tax year, you can claim up to $16,810, depending on your income limit.
At Florida Adoptions, we have many adoptive families who have taken advantage of this tax credit to make the cost of adoption less of a burden. This article details everything you need to know about the adoption tax credit, eligibility criteria, covered expenses, phase-out limits, and how to claim credit benefits to afford adoption.
What is the Adoption Tax Credit?
The adoption tax credit allows you to subtract qualified adoption expenses from your federal tax bill. It helps cover costs such as home study fees (including home visits and income verification), travel and accommodation, court fees, attorney fees, agency fees, and other adoption-related expenses.
This credit applies to all domestic, international, public, and private adoptions, with eligibility determined by state or federal guidelines.
The adoption tax credit is non-refundable, meaning it can reduce your tax bill to zero, but you won’t receive a refund for any excess amount. However, any unused credit can be carried forward for up to five years.
Unlike a tax deduction, a tax credit directly lowers the amount you owe, dollar for dollar. For example, a $1,000 tax credit reduces your tax bill by $1,000. If you’re adopting a child, this credit can significantly lower or eliminate your tax liability.
Who is Eligible for the Adoption Tax Credit?
All tax-paying adoptive parents are eligible for the adoption tax credit, except for those who adopt their spouse’s child (stepchild) or receive adoption assistance (like employer-paid adoption benefits) for the adoption expenses.
According to the IRS, you’re eligible for the adoption tax credit if your annual income was $252,150 or less in 2024. The credit phases out for incomes between $252,151 and $292,150. If you earned more than $292,150, you won’t qualify and must cover adoption costs yourself.
The eligibility criteria also depend on the state of the adopted child who must be:
- under the age of 18,
- or have special needs. For example, a physically/mentally disabled child may qualify for full credit.
How Is the Adoption Tax Credit Calculated?
The credits you receive depend on:
- Your filing status
- Your adjusted gross income (AGI), and
- State of the adopted child.
The adjusted gross income (AGI) is your total income (like wages, interest, and dividends) minus specific deductions (such as contributions to retirement accounts or student loan interest) used to determine your tax liability and eligibility.
If you’re married and file return jointly:
- You can claim up to $16,810 per child (2024 limit) if your combined Adjusted Gross Income (AGI) is below $252,150.
- If your AGI is between $252,151 and $292,150, the credit phases out.
- If your AGI exceeds $292,150, you can’t claim the credit.
If you’re filing a return separately:
- You can’t claim the adoption tax credit unless you meet special circumstances, such as qualifying as Head of Household under IRS rules or covering more than half the cost of maintaining your home.
- You may still qualify for the credit if you are legally separated and lived apart for the entire tax year, allowing you to file as a single filer.
If you’re divorced or separated parents:
- Only one parent can claim the tax credit—usually, the one who paid the qualified adoption expenses.
- If expenses were split, the credit cannot be divided—only one parent can take the full credit.
Special Needs Adoptions & Full Credit Eligibility
A child is considered special needs if:
- They are adopted from U.S. foster care.
- The state determines they can’t be returned to their parents.
- The state provides adoption assistance or subsidies because of factors like age, medical conditions, or difficulty in placement.
- The child is from a specific ethnic background or a minority group.
- The child is medically handicapped or mentally incapable of living on their own.
You can claim the full adoption tax credit for a special needs adoption, even if your expenses are lower than the credit limit. Since these children are state-determined, you don’t need to submit specific documentation.
These benefits only apply to domestic adoptions within the U.S. You might need to follow the standard credit limit for international adoptions.
What Expenses Qualify for the Adoption Tax Credit?
According to IRS rules, “qualified adoption expenses” include:
- Home study expenses: The fee for social worker’s service, paperwork, and background checks.
- Attorney fees: The cost of hiring an attorney for the adoption process.
- Court costs: The cost of legal paperwork and adoption proceedings.
- Adoption agency fees: The payments to licensed adoption agencies.
- Travel & accommodation expenses: The costs of traveling for adoption-related work.
- Other adoption-related expenses: The necessary costs for a child adoption process.
You may qualify for the adoption tax credit even before finalizing an adoption. For example, you can claim expenses like home study costs or legal fees, as long as they are directly related to the adoption process, even if you haven’t chosen a child yet.
But you get the tax credit per adopted child, not per year. For example, if your adoption expenses exceed your tax liability, you can carry forward the unused credit for up to five years, but you can’t claim more than the limit per child.
What doesn’t qualify for an adoption tax credit?
- Employer-reimbursed expenses: If your employer is paying for your adoption process, you can’t claim tax credit.
- Surrogacy parenting costs: You don’t qualify for the tax credit because surrogacy is not considered an adoption.
- Illegal adoption fees: You can’t claim tax credits that violate adoption laws.
- Stepchild adoption costs: The IRS doesn’t cover the costs of adopting your spouse’s child.
How to Claim the Adoption Tax Credit: 4 Things to Do
Here’s how you can claim the adoption tax credit:
- File Form 8839 (Qualified Adoption Expenses): Complete this form with your tax filing status, income, and any employer-provided adoption benefits (if applicable) to calculate your eligible credit.
- Add the adopted child’s profile: Fill in each adopted child’s profile such as disability status, Social Security Number (SSN), or Adoption Taxpayer Identification Number (ATIN). If you have more than 3 adopted children, you can attach another Form 8839 with their details.
- Attach to your tax return: Include Form 8839 with your Form 1040 when filing your federal income tax return.
- Ready your documentation: Keep all adoption-related documents, including final adoption decrees, placement agreements, and receipts for qualified expenses, in your records. While you don’t need to submit these with your return, the IRS may request them later.
4 Common Misconceptions About the Adoption Tax Credit
- I can claim the credit in the year I pay for adoption expenses: It depends on the timing and adoption type. For international adoptions, you can’t claim the credit until the adoption is finalized. But for domestic adoptions, you can file for the credit either in the same year the adoption is finalized or the year after you pay expenses.
- I can claim the credit for adopting a stepchild: You can’t claim tax credits for adopting your spouse’s child.
- It is the same as the child tax credit: The child tax credit is for general child-rearing costs while the adopted tax credit is specifically for adopted children. Both credits have specific eligibility criteria and income limits.
- The adoption tax credit is refundable: The adoption tax credit is non-refundable. You can reduce tax liability to zero, but won’t get a refund if the credit exceeds the tax you owe. Instead, the unused credit is carried forward for up to five years.
Final Thoughts
The adoption tax credit helps adoptive families offset legal and adoption-related expenses. It can reduce your tax liability, allowing you to save more for your child’s future living and education costs.
However, not everyone qualifies. If you’re considering adoption or are currently in the process, consulting a tax professional is the best way to understand your eligibility and maximize your benefits.
About Florida Adoptions
Florida Adoptions is a Pensacola-based private law firm that helps adoptive families and birth mothers with child-related issues and the adoption process. We specialize in adoption law, including step-parent adoption, private placement with infants and children, foster care adoption, relative adoption, and adult adoption. We also advocate and represent foster care children to help them find a loving home.
Get in Touch
Whether you’re looking for legal adoption assistance in Pensacola or want to learn more about adoption tax credits, get in touch with our team. We’re here to walk you through the adoption process. Contact us today at (850) 610-4166 or send us an email at stephanie@fladoptions.com.
