​Answers to Common Questions about the Federal Adoption Tax Credit

Prospective parents looking to adopt a child can get some financial help from the federal government.

For 2023, the federal adoption tax credit is $15,950. Since it’s a credit — rather than a deduction — it reduces your total tax liability. So, in non-tax-geek terms, that means it can help potential parents offset some of the costs associated with adopting.

If you have a domestic adoption attempt that wasn’t successful, you can still claim the credit. But for international adoptions, you can claim the credit only if the adoption is finalized. Also, the adoption has to be for a child younger than 18 who physically or mentally can’t take care of themselves.

Below are some more answers to commonly asked questions about adoptions. You can also check the IRS’s website here and here for additional information.

Q. Are there income requirements?

A. To claim the full credit, your modified adjusted gross income has to equal or be less than $239,230. You'll get a reduced tax credit if it’s more than that but less than $279,230. If you make more than that, you can’t claim the credit.

If the adoption tax credit is more than your tax liability for the year, you can carry the credit forward for up to five years. For international adoptions, you’ll need to claim the credit after the adoption is finalized.

Q. Do you have you itemize your deductions, or can you take the standard deduction?

A. You can do either and still claim the credit.

Q. What kind of expenses qualify?

A. Expenses have to be “reasonable and necessary,” and you’ll need to provide documentation to the IRS. Expenses that qualify include:

• Travel expenses, like meals and lodging if you have to be away from your home
• Court costs and attorney fees
• Fees paid to an adoption agency

If you have to pay to adopt your spouse’s child, those expenses would not qualify.

Q. What forms do I need to fill out?

A. You’d need to complete Form 8839 “Qualified Adoption Expenses.” And then attach it to your 1040 or 1040A. Usually, if you’re married, you’ll need to file a joint return to claim the adoption tax credit.

Q. When should I claim the credit?
A. For domestic adoptions of a child born in the U.S. or for children who are resident aliens, you can claim the credit:

• The year after you incurred expenses.
• In the same year you incur expenses.
• The year after the adoption is finalized if you incur additional qualified expenses.

What if my employer provides adoption benefits?
A. Employee adoption benefit programs are tax deductible. You can also claim the credit for any additional adoption expenses your employer doesn’t cover. Keep in mind that you can’t claim the adoption tax credit for expenses your employer does cover.

Does my state offer any adoption credits?
Every state is different, so do your research, and check with a CPA or accountant to learn the specific rules where you live.

Below are some links for states where the bulk of our clients live:

• South Dakota
• Nebraska
• Wyoming

If you have questions about adoption expenses and tax credits, let us know.