Claiming the Federal Adoption Tax Credit for Adoptions Finalized from 2015 to 2023

Updated September 2023

Who Is Eligible for the Adoption Tax Credit?

You can claim the federal adoption tax credit if:

  • You adopted a child (other than a stepchild) from foster care
  • You adopted internationally
  • You adopted a relative’s child
  • You adopted privately from the US (except your spouse’s child). If you were adopting from the US, you can also claim the credit for expenses for a failed or non-finalized adoption, although you need to wait until a year after you incur the expenses.

AND

  • At the time of adoption, the child was under 18 (or physically or mentally unable to take care of him or herself).

How Does My Income Affect My Benefit?

How much you will benefit from the adoption tax credit depends on your income and federal income tax liability—which is the amount you are responsible for in federal income taxes. Those who have lower incomes may not be able to use the credit and those with moderate incomes often can’t use the whole amount.

For those with higher incomes, the adoption tax credit phases out. For 2023, those with adjusted gross incomes above $279,230 could not claim the credit; those with incomes from $239,230 to $279,230 could claim a portion of the credit.

How Much Can I Claim?

Adoptions from Foster Care When the Children Receive Adoption Assistance

When a child adopted from US foster care receives adoption assistance (also known as adoption subsidy) it is considered a special needs adoption for the purposes of the adoption tax credit, even if the child does not have a disability. Children with disabilities who do not receive adoption assistance/adoption subsidy benefits are not considered special needs for purposes of the adoption tax credit. Some private domestic adoptions may also receive adoption assistance and therefore be considered special needs for the adoption tax credit.

If you completed a special needs adoption from foster care (as defined above), you can claim the federal adoption tax credit even if you had no adoption expenses. (This doesn’t mean, though, that you will receive the full credit. How much you can actually receive still depends on your income as explained in the next section below.)

If you receive adoption assistance or adoption subsidy benefits for your child, you can claim the maximum credit ($15,950 per child for adoptions finalized in 2023) as your adoption expenses, even if you had little or no adoption expenses.

Other Adoptions

For all other adoptions (except those where you adopt your spouse’s child, which are not eligible for the credit), you must have qualified adoption expenses to claim the credit. These expenses are the costs associated with completing the legal adoption of a child, such as attorney’s fees, court costs, agency fees, homestudy costs, travel to complete the adoption, etc.

Will I Benefit From the Adoption Tax Credit?

What you can claim is different from how much you will actually be able to use. How much of the adoption tax credit you will actually use depends on your income and personal tax situation.

Whether an adoption is considered special needs does not affect how much you will be able to benefit from the adoption tax credit. It only enables you to claim the full amount of the credit even if you did not have any adoption expenses.

The adoption tax credit is a nonrefundable credit, which means it only offsets your federal income tax liability. Your income tax liability is the amount you are responsible for in federal income taxes for the year.

If you have ever done your taxes manually, your federal income tax liability is roughly the amount you would look up in the tax tables in the back of the instructions. If you want to see what your tax liability was in 2023, you can look at line 18 of Form 1040. If the line is blank or zero, you had no federal income tax liability. People with no tax liability will not benefit from the adoption credit this year. You can still file for the credit so you can carry it forward to future years if your tax situation changes. (Please note that the amount on line 18 is not exactly the amount you would benefit because there are some credits that come before the adoption credit, for example the child tax credit.)

If you can’t use all of the credit in the year you claim it, you can carry the remainder forward for up to five more years to offset any of those years’ federal tax liability.

Data shows:

  • Families with adjusted gross incomes of less than $30,000 are not likely to benefit from claiming adoption tax credit at all because they do not owe any federal taxes.
  • Those making $30,000 to $50,000 will probably be able to use only a portion of the credit (maybe a few thousand), with the benefit spread out over six years.
  • Those making more than $100,000 can typically use most of the credit for one child in a year or two.

Adoption Tax Credit Basics

Amount of the Adoption Tax Credit

The adoption tax credit is a one-time credit and the amount you can claim depends on the year you finalized your child’s adoption.

Year of Adoption Maximum Amount of Credit per Child

Maximum Amount of Credit per Child: $16,810

Maximum Amount of Credit per Child: $15,950

Maximum Amount of Credit per Child: $14,890

Maximum Amount of Credit per Child: $14,440

Maximum Amount of Credit per Child: $14,300

Maximum Amount of Credit per Child: $14,080

Maximum Amount of Credit per Child: $13,810

Maximum Amount of Credit per Child: $13,570

Maximum Amount of Credit per Child: $13,460

Maximum Amount of Credit per Child: $13,400

Maximum Amount of Credit per Child: $13,190

When You Claim the Adoption Tax Credit

Domestic Adoptions

For a special needs adoption (adoption of a child from U.S. foster care who receives adoption assistance benefits), you claim the adoption tax credit the year it is finalized. So if you finalize in January 2023, you claim the 2023 adoption tax credit when you do your taxes for 2023 (typically early in 2024).

For other domestic adoptions, you can claim your qualified adoption expenses before the adoption is finalized, but you must wait a year after the expenses are incurred to claim the credit for a non-finalized adoption. So, if you started the adoption process of a US child in 2021 and had expenses that year, you must claim them when you filed your taxes for 2022 (in early 2023). If the adoption then is finalized in 2023, you would claim your 2022 and 2023 expenses with your 2023 taxes. The total maximum you could receive would be the 2023 limit, which is $15,950.

See the chart below:

If you had expenses… Then take the credit…
Any year before the adoption becomes final The year after the year of the payment
The year the adoption becomes final The year the adoption becomes final
Any year after the year the adoption becomes final The year of the payment

International Adoptions

You cannot claim the adoption credit for an international adoption until the adoption is finalized.

If you had expenses… Then take the credit…
Any year before the adoption becomes final The year the adoption becomes final
The year the adoption becomes final The year the adoption becomes final
Any year after the year the adoption becomes final The year of the payment

Exclusion

The law also allows adoptive parents whose employers offer an approved adoption assistance program to exclude any reimbursed expenses from their taxable income. Parents cannot claim the same expenses for the exclusion and the credit.

For example, a family spends $17,000 on their adoption, and the employer reimburses $10,000 through an approved adoption assistance program. The family can exclude the $10,000 from their taxable income and claim only the remaining $7,000 for the adoption credit.

Those who adopt children with special needs can use the maximum amount of the exclusion ($15,950 for 2023) regardless of any adoption expenses or reimbursement as long as their employer offers a qualified adoption assistance program.

Please review the instructions for Form 8839 for more information on the exclusion.

How to Claim the Adoption Tax Credit

Because each year is slightly different, follow the links below to learn how to claim the credit for the year you adopted.

  • If you adopted in 2023 you will claim the credit when you file your 2023 taxes in 2024.

  • If you adopted in 2022 you will claim the credit when you file your 2022 taxes in 2023.

  • If you adopted in 2021 you will claim the credit when you file your 2021 taxes in 2022.

  • If you adopted in 2020 you need to first amend or file your 2020 taxes in 2021.

  • If you adopted in years 2015-2019* you may still be able to benefit for the adoption tax credit if you have not filed for the credit already. Since those years are closed to receive a refund, you would claim the credit they year you finalized. You would use any credit that year as if you filed timely, and any unused credit you would carry forward to the next tax year. You continue to do that until you use up the credit, or you carry forward into an open year (as September 2023 that is 2020 or later, *if you filed an extension on your 2019 taxes you have until three years after that date, but no later than October 15, 2023). Contact us at Families Rising if you are in this situation, [email protected].

Other Resources

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