Federal Adoption Tax Credit

The child Adoption Credit is designed to help parents with the expenses involved in adopting a qualified child (including a child with special needs). An eligible child is any child under 18 or a child that lacks the ability to care for him or herself. The credit is subtracted from your tax liability to the federal government. However, the credit cannot be used for any reimbursed expense incurred while adopting the child. In addition to the credit, there may be qualified expenses paid by your employer that can be excluded from you gross income.

Qualifying expenses include adoption fees, court costs, attorney fees, traveling expenses (including meals and lodging while away from home), and other expenses directly related the adoption of an eligible child. The child must be a U.S. citizen or resident, unless the adoption becomes final. In that case, 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 a taxpayer may be eligible for and increased credit or exclusion.

The credit and exclusion for qualifying adoption expenses are each 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 will be reduced by a certain percentage or, if above the maximum limit, the credit will be eliminated in its entirety.

In most cases, if you are married, you must file a joint return to take the adoption credit. If your filing status is married filing separately, you can take the credit or exclusion only if you meet special requirements.

Complete this form, Qualified Adoption Expenses Estimator Sheet, and find out which expenses you might be able to deduct.

Once you start your tax return on eFile you will be prompted to answer the same questions in a simple interview and eFile will automatically select and complete Form 8839 for you and efile it with your tax return.