Can I Claim the Adoption Tax Credit?

What Is the Adoption Tax Credit?

The Adoption Credit is a tax credit designed to help parents with the expenses involved in adopting a qualified child (including a child with special needs). When you prepare and efile your tax return on efile.com, the credit will automatically be reported and calculated for you if you qualify for it. 

What Kind of Child Qualifies a Parent for Claiming the Adoption Credit? 

A child that qualifies for the Adoption Credit is any child under 18 or a child that lacks the ability to care for him or herself.

Can I Claim the Adoption Tax Credit If the Adoption Process is Not Completed When I File My Tax Return?

In order to qualify for the Adoption Tax Credit, the child must be a U.S. citizen or resident on or before December 31. If the adoption becomes final, the adoption credit can be taken for non-U.S. citizens or foreign residents. If the child has special needs and the state determines that the child would not be adopted without assistance, then you may be eligible for an increased tax credit.

Is the Adoption Tax Credit Refundable? 

Though the credit was made permanent in 2013, the credit is not refundable for Tax Years after 2011.

What is a Nonrefundable Tax Credit?

A nonrefundable tax credit means that the credit cannot be used to increase your tax refund or to create a tax refund when you don't already have one. Refundable tax credits, on the other hand, are treated as payments of tax you made during the year.

What Are Qualified Adoption Expenses?

Qualifying expenses include the following:

  • adoption fees
  • court costs
  • attorney fees
  • traveling expenses (including meals and lodging while away from home)
  • other expenses directly related to the adoption of a qualified child

Can Any Previously Reimbursed Expenses Be Counted Towards the Adoption Tax Credit?

 Any expenses that were previously reimbursed, such as by your employer, may not be counted towards the credit. However, there may be qualified expenses paid by your employer that can be excluded from your taxable income.

Can I Claim the Adoption Tax Credit for Domestic or Foreign Adoptions?

Generally, you can claim the credit in most of these cases, whether the adoption is foreign or domestic. However, the timing rules for which expenses can be claimed vary between the domestic and foreign adoptions.

How Much Is the Adoption Credit Worth?

For Tax Year 2016, the maximum adoption credit is $13,460 per child.

The credit for qualifying adoption expenses is subject to a dollar limit and an income limit. The income limit is based on your adjusted gross income (AGI). If your income is above the AGI limit, it may be reduced by a certain percentage or, if above the maximum limit, the credit may be eliminated in its entirety. Due to The Affordable Care Act, income limits for the Adoption Credit will be adjusted for inflation.

Since the Adoption Tax Credit became no longer refundable as of 2012, you can "save" any unused portion of your credit and carry it forward to reduce your tax for up to 5 years.

How Do I Claim the Adoption Tax Credit?

The Adoption Tax Credit may be claimed on a tax return by any qualifying taxpayer with a filing status of Married, Widow(er), or Head-of-Household by using Form 8839, Qualified Adoption Expenses efile it . If you are married, you must generally file a joint return to claim the adoption credit. If your filing status is Married Filing Separately, you can take the credit only if you meet special requirements.

You can prepare and efile Form 8839 with your tax return on efile.com. We will automatically report your Adoption Tax Credit on the correct tax form for you based on your answers to several tax questions. 

Can I Efile a Tax Return with the Adoption Tax Credit? 

Due to increased documentation requirements introduced by the Affordable Care Act, taxpayers claiming the Adoption Tax Credit will generally have to file their 2016 Tax Returns by mail. You must include one or more adoption-related documents with your mailed tax return.

Though you can still use efile.com to prepare and print your return, you will need to mail a paper copy to the IRS. It is easy to print a completed return from your efile.com account.

Are There Other Tax Breaks I Can Claim on My Tax Return?

See what other tax credits and tax deductions you may qualify to claim on your tax return.