H Credit Guide

How Many Years Can You Claim The Adoption Tax Credit

Can I receive the credit if I adopted a child from another country?

Yes, you are entitled to reimbursement for your eligible adoption expenses up to the maximum amount once the adoption is formally completed, either in the US or in the nation where your kid was born.

Is the adoption tax credit for all adoptions or just special needs? Can I receive the credit if I adopted a healthy child? What kinds of adoptions benefit from the tax credit?

With the exception of stepparent adoptions, all adoptions (domestic, international, private, and public foster care) qualify for the adoption tax credit. For additional details on the differences between special needs adoptions, see the section below.

What if I adopt my partner’s child but we are not married?

If you have qualified adoption expenses, you can claim the adoption tax credit since it is not regarded as a stepparent adoption if you are single.

What is the maximum amount of the credit for 2021? At what income level does the credit begin to phase out?

The maximum adoption credit and exclusion for 2021 adoptions (claimed in early 2022) is $14,440 per child. Families with modified adjusted gross incomes over $216,660 will see a phase-out of the credit, and those with incomes around $256,660 will see the credit disappear entirely.

The maximum credit you can claim is determined by the number of adopted children, as the credit is granted per child. Your maximum payment for adopting two kids in 2021 would be $14,440 x 2 = $28,880. The maximum amount you can adopt four children for is $14,440 x 4 = $57,760. There is no cap on the number of children you may adopt for the purposes of the tax credit.

What is the maximum amount of the credit for 2021? At what income level does the credit begin to phase out?

The maximum adoption credit and exclusion for 2021 adoptions (claimed in early 2022) is $14,4400 per child. Families with modified adjusted gross incomes over $216,660 will see a phase-out of the credit, and those with incomes around $256,660 will see the credit disappear entirely.

What is tax liability?

The total amount of federal income tax that you owe for the year is known as your federal income tax liability. If you manually filed your taxes, this is the amount you find in the tax table based on your adjusted gross income (which, for some families, also includes the repayment of the Affordable Care Act credit and the alternative minimum tax). Even if you receive a refund, it only indicates that you made more tax-related payments than you owed.

Is the adoption tax credit refundable for 2021 or future years?

No. The credit could only be refunded for the 2010 and 2011 tax years. No matter how much tax they owe, a person can still benefit from a refundable credit (see above).

What does it mean that the credit is not refundable?

A non-refundable credit allows taxpayers to benefit from a refund of their federal income taxes only to the extent that they would have paid in taxes otherwise. The amount on line 18 of the 2020 Form 1040 less certain other credits (such as the up to $600 Child Tax Credit per child and the Child and Dependent Care Expenses) allows taxpayers to use as much of the adoption tax credit as their entire federal income tax liability in a single year.

Even those who typically receive a refund might still owe money on taxes; however, the adoption tax credit could increase the taxpayer’s refund.

Lower- or moderate-income families may not owe any federal taxes and will not be eligible for a non-refundable credit; alternatively, they may have more money in their Child Tax Credit (Line 19 on Form 1040 for 2020) than they owe in taxes. In the event that a family’s tax liability changes in the future, we still advise them to file for the credit (Form 8839) as long as they would have to file taxes anyway (see more about “carry forward” below).

Here’s a very basic example: During the year, $5,000 in federal income taxes are deducted from the paychecks of a family. Upon completing their taxes, they consult the tax tables and find that, in accordance with their adjusted gross income, they owe $4,000 in federal income taxes. They would be entitled to a $1,000 refund if there was no adoption credit—that is, the $5,000 they paid less the $4,000 they have to pay. The family’s eligible adoption costs were $8,000 for the adoption of their lone child, who was also their dependent. To make their tax equal to zero, they would utilize $4,000 of the Adoption Tax Credit. They would receive a refund of $5,000 in addition to any refundable additional child tax credit that was owed to them, and they would still have the $5,000 that they had withheld as payment.

They then receive additional refunds based on their future tax liability by carrying over the remaining $4,000 ($8,000 in expenses minus the $4,000 they used) to future years. (See more on the carry forward below. ).

Is the adoption tax credit a deduction?

No, the adoption tax credit is not a deduction. The credit reduces the amount of federal tax liability owed for the year on a dollar-for-dollar basis.

How much of the credit can a parent claim?

(Note: depending on your tax situation, you may be able to claim a credit but never be able to use it.) ).

Regardless of whether they have any qualifying adoption expenses at all, parents who adopt a child deemed to have special needs by the state or county child welfare agency are eligible to receive the maximum credit.

Parents can claim the credit for qualified adoption expenses up to the maximum amount for other adoptions (apart from stepparent adoptions, which are not eligible for the credit). Therefore, a family may only claim the $5,000 that they spend on a private, non-special needs adoption, not the entire $5,000. Families are limited to claiming the maximum amount if their expenses exceed it. Therefore, provided that a family’s income is below the above-mentioned phase-out limits, they will only be eligible to claim $28,880 ($14,440 per child) if their adoption expenses total $30,000 for two children in 2021.

In every situation, a parent’s actual annual benefit is determined by their tax liability (refer above).

What constitutes a special needs adoption?

Special needs refers more to the child’s difficulty being placed than to a disability or medical condition. Essentially, Medicaid through the adoption assistance program or a subsidy or assistance for adoption must be provided to the child (including reimbursement for one-time adoption costs). “A child is a child with special needs if all three of the following statements are true,” according to IRS instructions for Form 8839.

  • At the time the adoption process started, the child was a citizen or resident of the United States or any of its possessions (US child)
  • It has been decided by a state, including the District of Columbia, that the child cannot or should not be sent back to live with their parents.
  • The state has decided that unless the adoptive parents receive support, the child will not be adopted. [emphasis added by Families Rising] States consider the following factors when making this decision: the child’s age and ethnic background; whether the child belongs to a sibling group or minority; and whether the child has a medical condition or a physical, mental, or emotional handicap. ” .

Once more, a large number of kids with illnesses or disabilities do not fit the IRS definition of special needs. To be eligible for the credit, these parents must have qualified adoption expenses and be able to prove them.

If my child doesn’t receive a monthly adoption assistance benefit is my child considered special needs?

As long as you receive Medicaid through the adoption assistance program or reimbursement for one-time adoption expenses, you do not need to receive a monthly payment in order to be eligible for the adoption tax credit. Both an adoption assistance agreement and benefits from the adoption assistance program must be obtained by the child.

It is not regarded as a special needs adoption if you do not receive adoption assistance benefits. For the purposes of the tax credit, many adoptions of children with disabilities and other special needs are not regarded as special needs adoptions.

Can the credit be carried forward if I don’t have enough tax liability the first year I claim it?

Yes, the credit can be used for a total of six years by taxpayers: the year they first qualify for it and the following five years.

Even if adoptive families do not think they will be able to use any of the adoption tax credit in the first year, we still encourage them to file taxes and include a Form 8839 to claim the credit. Families who claim the credit will avoid having to go back and amend their taxes once they are able to benefit, even if they have tax liability in future years.

Does a parent who adopted a child who the state has determined as special needs still have to have tax liability?

Yes, the only distinction pertains to adoptions with special needs; parents are eligible to receive the maximum credit regardless of whether they incurred any adoption-related costs. The credit is still non-refundable for special needs adoptions.

I already claimed the credit for my child’s adoption and received the full refund. Do I get to claim it again?

Not unless you adopted again. The credit is a one-time credit per child. You are undoubtedly qualified to apply for a second adoption tax credit for that child (or children) if you decide to adopt again.

If you adopted in 2012 or later but never applied for the credit, you might still be eligible for benefits based on your unique tax circumstances. See below for more information.

When can I claim the credit?

You claim the credit in the tax year that the adoption is finalized if it is an international adoption or a special needs adoption (without qualified adoption expenses). You cannot claim the credit for a non-finalized international adoption.

You have to claim any costs associated with domestic adoptions that are not special needs either in the year that the adoption is finalized or, in the case of adoptions that aren’t, in the year that the costs are paid (you have to claim the year after paid if you haven’t finalized). Therefore, you must claim the 2018 expenses with your year 2019 tax return (usually filed in early 2020), the 2019 expenses with your 2020 tax return, and the 2020 and 2021 expenses with your 2021 tax return (filed in early 2022). This applies if you finalized an adoption in 2021 but had expenses from 2018 to 2021. The year of finalization will determine the maximum credit.

When adopting a child with special needs without incurring costs, you submit the maximum credit claim in the year the adoption is completed. You can only deduct the actual costs incurred (not the maximum credit) for US special needs adoptions that fail, and you would have to wait until the tax year following the adoption for this information to be available.

I got a placement in 2021 but haven’t finalized yet (or will finalize in  2022). When can I claim the adoption tax credit?

Taxes from 2021 can be used to reimburse private domestic adoption costs incurred in 2020 for an adoption that is not finalized. Costs incurred in 2021 cannot be reimbursed until 2022 taxes are submitted. Parents can claim 2021 and 2022 expenses with their 2022 taxes filed early the following year if the adoption is finalized in 2022.

How do I claim the adoption tax credit?

For the year of the adoption, you must complete Form 8839 and submit it with your Form 1040. If you use tax preparation software or a professional, they can finish it for you.

Can I take the credit every year?

No, it is a one-time credit per child. You can claim the credit in the year of finalization (or before the finalization of a domestic adoption with approved adoption expenses) if you adopted in 2012 or later. The credit is then used for that year, and any balance is carried over to subsequent years until it is fully utilized or six years have elapsed.

The only exclusion is that you must claim your expenses the year following the year in which the US adoption is not finalized. You can then claim the remaining credit in the following year if you haven’t already used up all of your allotted credit by the time you finish that year.

Is there a limit to the number of credits I can claim if I adopted multiple children?

No. The adoption tax credit is available for as many adopted children as you choose (other than a step-child) You will require a second (and possibly a third) form 8839 to list each child if you adopt more than three.

What documentation is required?

Since the credit is not refundable, no documentation is needed for the 2021 tax year; however, in the event of an audit, it is advised that you retain copies of the documentation with your tax returns.

A copy of the adoption assistance agreement, which is the state’s determination of special needs, is the paperwork you want to keep in your file if you are claiming full credit for a child who receives adoption assistance.

What are qualified adoption expenses?

“Reasonable and essential costs directly associated with, and for the primary goal of, the legal adoption of an eligible child are considered qualified adoption expenses.”

Qualified adoption expenses include:

  • Adoption fees,
  • Attorney fees,
  • Court costs,
  • travel costs (lodging and food included) while away from home, and
  • Re-adoption expenses relating to the adoption of a foreign child.

Qualified adoption expenses do not include expenses:

  • which you obtained funding from any federal, state, or local program,
  • That violate state or federal law,
  • For carrying out a surrogate parenting arrangement,
  • For the adoption of your spouse’s child,
  • compensated or reimbursed by your employer, another individual, or entity, or
  • Allowed under any other federal income tax law provision as a credit or deduction ”.

Can I claim the credit for a failed adoption?

Yes, provided the adoption took place in the United States and your adoption-related expenses met the requirements. You have to wait a year after paying the costs, and it is considered an unfinished adoption. Thus, in the event that your 2021 adoption-related expenses prove unsuccessful, you can deduct them from your 2022 taxes, which are normally filed in the first quarter of 2023.

I had a failed US adoption but later adopted successfully. Can I claim the credit twice?

No. The instructions for Form 8839 state:

“Attempted Adoptions of U.S. Children

If you attempted more than once to adopt a single qualified U S. child, add up your expenses and fill out just the “Child 1” line. The additional attempt(s) should not be reported on the “Child 2” or “Child 3” line. Only those who have adopted or attempted to adopt two or three eligible children should fill out the “Child 2” or “Child 3” lines.

Example. You planned to adopt one U. S. child. After one failed attempt at adoption, you were able to adopt a different child. Since you attempted to adopt one eligible child more than once, just fill in the “Child 1” line. ”.

I had a failed international adoption. Can I claim the adoption tax credit?

No. An international adoption must be completed in order to receive any credit.

I had a failed adoption of a child with special needs. Can I claim the maximum credit without expenses?

No. Like with any other domestic adoption, you could deduct adoption-related expenses in your taxes the year after you incurred them.

If I’m claiming the credit for a non-finalized or failed US adoption, what do I use for the child’s identifying number?

Fill in as much information as you can on line 1 if you were unable to provide full details about an eligible child you attempted to adopt the previous year due to the adoption being unsuccessful or not finalized by the end of the year. Put “See Attached Statement” in the columns where you lack the necessary data. Next, include a statement with your return that includes the name and contact information of any organization or representative (like a lawyer) that helped with the adoption attempt. Make sure the statement has your name and social security number written on it.

Families in these circumstances will need to file on paper because the IRS will not accept electronic forms 8839 filings without an adoption taxpayer identification number or social security number.

What if I adopted a child aged 17 who turned 18 before I filed for the credit?

If the child was under the age of 18 at the time of finalization, you are still eligible to claim the credit.

Can I claim the adoption tax credit for an adoption finalized prior to 2012?

For adoptions completed before 2012, there is no longer a chance to take advantage of the adoption tax credit.

What is the exclusion for employer-provided adoption benefits?

Additionally, the law permits adoptive parents whose employers provide an authorized program for adoption assistance to deduct any reimbursed costs from their taxable income. Parents are not eligible to receive credit for the exclusion and the expenses. For instance, a family pays $17,000 for adoption, and through an authorized adoption assistance program, the employer reimburses $10,000 to the family. The family is only eligible to claim the remaining $7,000 for the adoption credit and can deduct the $10,000 from their taxable income.

Adopters of special needs children may deduct up to the maximum exclusion amount ($14,440 for 2021) from their employer’s adoption assistance program, free of costs or reimbursement.

For more details on the exclusion, please refer to Form 8839 instructions.


What is the maximum adoption credit IRS?

Since the credit is nonrefundable, the maximum amount it can be used for is your annual tax liability. Any credit, though, that exceeds your tax obligation can be carried forward for a maximum of five years. $15,950 per child is the maximum amount (dollar limit) for 2023.

What is the tax credit could result from adopting a child?

You can claim the adoption tax credit in the year that the adoption of your child is finalized. Since it is a non-refundable tax credit, you can use it to deduct the amount of taxes you owe in full from the credit, lowering your overall tax obligation.

What is the federal adoption tax credit for 2023?

General Information. 1. How much is the adoption tax credit? A family may receive up to $15,950 per adopted child as credit for adoptions finalized in 2023 (tax returns filed in 2024).

What is the IRS adoption limit for 2024?

The amount of qualified adoption expenses up to $16,810 is the maximum credit allowed for adoptions for tax year 2024; this is an increase from $15,950 for 2023.

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