The 2021 Adoption Tax Credit
The Adoption Credit is a non-refundable tax credit which means that the amount of the tax credit is limited to the taxes due on your 2021 tax return. Any additional credit amount can be carried forward for up to five years. For example, let's say your credit is $2,000 and you owe $1,500 in taxes for 2021, you can apply the remaining $500 on your 2022 Tax Return. On a 2021 Tax Return, the maximum adoption tax credit amount is $14,440 per eligible child. An eligible child is one who is under the age of 18 or is physically or mentally not able to care for themselves.
Once you have finalized the adoption, you will be able to claim your adopted child as a dependent.
The tax credit is designed to help parents with the expenses related to adopting a child under the age of 18 (including a child with special needs). You can claim this tax credit if you adopt a United States Citizen child or if you adopt a child from another country. You can include your adoption expenses on eFileIT Form 8839 when you start a free tax return on eFile.com and the credit will automatically be calculated and reported for you on your eFile.com tax return.
Adopting a Child 2021
You can generally claim the nonrefundable tax credit for any child under 18 who you adopt and pay certain qualifying expenses for. This can be if you are single, married, or unmarried and adopt a step-child (stepparent adoption). This credit is per child, meaning that if you adopt multiple children and pay qualifying expenses for both of them, you may be able to claim $14,440 per child. There is not limit on the number of children the credit may be applied to.
You can qualify for the Adoption Tax Credit if one or more of the following statements are true:
- The child is a U.S. citizen or resident (or a U.S. citizen with special needs) on or before December 31 of the tax year.
- If the adoption becomes final, you claim the credit for a non U.S. citizen or foreign resident. 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.
- You paid qualified adoption expenses (see below for examples) related to adopting a U.S. child (including children with special needs) in either: 2020 and the adoption was not final at the end of 2020, or 2021 and the adoption became final before the end of 2021.
- You adopted a U.S. child with special needs and the adoption became final in 2021. You might be able to claim the credit even if you or your employer did not pay any qualified adoption expenses - details below.
- A registered domestic partner may pay the adoption expenses in some cases. For example, if both parents live in a state that allows a same-sex second parent or co-parent to adopt their partner's child, these may also be considered qualified expenses.
- You paid adoption expenses connected to the adoption of a foreign child in either: 2021 or a prior year and the adoption became final in 2021, or 2021 and the adoption became final before 2022.
- You have an adoption credit carry forward from 2020.
Qualified Adoption Expenses
Qualifying expenses include the following:
- Fees for adoption, attorney, and court
- Travel expenses (including meals and lodging while away from home)
- Other expenses directly related to the adoption of an eligible child.
Expenses do not include:
- Any expenses you received under any federal, state, or local programs
- Those that violate federal or state law
- Those that carry out a surrogate parenting arrangement
- Those related to the adoption of your spouse's child
- Those reimbursed by your employer
- Those allowed as a tax deduction or tax credit under any other federal income tax law or other provision.
Any expenses that were previously reimbursed 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.
You can also claim the Adoption Credit for most foreign or domestic adoptions. However, the timing rules for which expenses can be claimed vary between domestic and foreign adoptions:
- Domestic Adoption - Qualified adoption expenses paid before the year the adoption becomes final are allowable as a credit for the tax year following the year of payment (even if the adoption is never finalized).
- Foreign Adoption - Qualified adoption expenses paid before and during the year are allowable as a credit for the year when the adoption becomes final.
Adopting a Special Needs Child
If you adopt a U.S. child who has been determined to have special needs by a state, then you are generally eligible for the maximum amount of the credit. Most importantly, you may be eligible to claim the credit even if your employer or you did not pay any qualified expenses for the adoption. There are certain criteria to meet:
- The child is either a citizen or resident of the United States at least from the time when the adoption process began
- A state has determined that the child cannot or should not be returned to their parent's home
- The state determined that the child likely would not be adoptable without any assistance provided to the adopting family.
Adoption Credit Amount
If you adopt a child in 2021, you may be eligible to take this tax credit.
For Tax Year 2021, the maximum adoption credit is $14,440 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 modified Adjusted Gross Income (AGI). If your income is above the AGI limit of $216,660, it may be reduced by a certain percentage or, if above the maximum limit of $256,660, 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. You can save any unused portion of your credit and carry it forward to reduce your tax for up to 5 years.
2022 Adoption Tax Credit
If you adopt a child in 2022, the credit maximum amount is $14,890 with an AGI phaseout threshold of $223,410 to $263,410.
2020 Adoption Tax Credit
For Tax Year 2020, the maximum adoption credit was $14,300 per child with a phaseout range of $214,520 - $254,520. See how to file a previous year return now.
How to Claim the Adoption Tax Credit
The Adoption Tax Credit can be claimed on a tax return by any qualifying taxpayer with a filing status of Married Filing Joint, Qualifying Widow(er), or Head Of Household status. When you prepare and e-File your tax return on eFile.com, you can enter your adoption expenses and we will automatically prepare and report your Adoption Tax Credit on eFileIT Form 8839 and it will be e-Filed with your return. If you are married, you must file a joint return to claim the adoption credit. If you filed using the filing status of Married Filing Separately, you can take the credit only if you amend your return and change it to the Married Filing Joint status in the years that you wish to claim the credit.
Due to increased documentation requirements by the Affordable Care Act, some taxpayers claiming the Adoption Tax Credit might have to file their return by mail. You must include one or more adoption-related documents with your mailed tax return. You can still use eFile.com to prepare and print your return, however you will need to mail a paper copy to the IRS. It is easy to print a completed return from your eFile.com account.
See what other tax credits and tax deductions you might qualify to claim on your tax return:
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