Claiming the Child Adoption Credit and Qualified Adoption Expenses

By | February 6, 2014

The adoption tax credit was made permanent at the beginning of 2013, but it was not made refundable. This means that people with lower and moderate incomes will not benefit. Although the credit is a permanent credit, it is still at risk of being eliminated altogether if comprehensive tax reform moves forward in Congress. There are many ways to build your family through adoption.

Claiming the Child Adoption Credit and Qualified Adoption Expenses

International adoption, adoption from foster care, domestic agency adoption, and domestic private adoption are among the major ways orphaned children find forever families. The adoption tax credit was intended to ease the significant financial burden undertaken by every America family that adopts a child, no matter what type of adoption they use to build their family.


How to claim the child adoption credit?

Congress realizes that child adoption is beneficial for society and has enacted a child adoption tax credit to ease the financial burden of taxpayers who wish to adopt a child. Taxpayers may claim a nonrefundable credit for qualified adoption expenses for each eligible child that they adopt. If they did not previously claim this credit, taxpayers could look into amending their tax returns to claim the child adoption credit.


How much is the child adoption credit?

The maximum adoption credit amount for the 2013 tax year is $12,970 ($13,190 for 2014). The credit is phased out ratably in 2013 for taxpayers with a modified adjusted gross income (MAGI) over $194,580 ($197,880 in 2014), and no credit is allowed to taxpayers with a MAGI of $234,580 ($237,880 in 2014).

The nonrefundable adoption credit replaced the prior refundable credit , which was in effect for tax years 2010 and 2011. This means that if a taxpayer does not owe a particular amount in taxes, that they will not get the extra amount of the credit back. A taxpayer must have qualified adoption expenses in order to claim benefit of the child adoption tax credit.


What are Qualified Adoption Expenses?

Qualified adoption expenses are generally pretty broad and  include reasonable and necessary adoption fees, court costs, attorney fees, and other expenses which are directly related to the legal adoption of an eligible child. All costs must be legal and no expenses that would violate American law abroad are deductible. Furthermore,  costs associated with a surrogate parenting arrangement are also ineligible for use in claiming the credit.

Expenses used to claim any other deduction or credit may not be used to claim the adoption credit. This includes amounts excluded from gross income that are paid or incurred by an employer for the employee’s qualified adoption expenses pursuant to an adoption assistance program. The dollar limitation for the exclusion is identical to the dollar limitation for the credit ($12,970 for 2013).  Qualified adoption expenses incurred in excess of the amount provided under an employer’s adoption assistance program may be used to claim the adoption credit.

As with all tax credits, it is absolutely necessary for the taxpayer to keep detailed records in order to substantiate all qualified adoption expenses. With this in mind, the child adoption tax credit can be a great benefit for taxpayers wishing to adopt a child.


Adoption Credit Tax Forms

Parents need to refer to IRS Form 8839 and the accompanying instructions. Visit  and