Eight Facts About the Adoption Credit

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Taxpayers who adopted or started the adoption process in 2021 may qualify for the adoption credit. This credit can be applied to international, domestic private, and public foster care adoption; however, taxpayers who adopt their spouse’s child cannot claim this credit.

Here are eight facts to help people understand the adoption tax credit and whether they can claim it when filing their taxes:

  1. The maximum adoption credit taxpayers can claim on their 2021 tax return is $14,440 per eligible child.
  2. There are income limits that could affect the amount of the credit. The income limit on the adoption credit or exclusion is based on your modified adjusted gross income (MAGI). If your MAGI amount for 2021 falls between certain dollar limits, your credit or  exclusion is subject to a phaseout (is reduced or eliminated). For tax year 2021, the MAGI phaseout begins at $216,660 and ends at $256,660. In other words, if your MAGI amount is below $216,660 for 2021, you can take the full credit, but if your MAGI amount for 2021 is $256,660 or more, your credit will be zero.
  3. Taxpayers should complete Form 8839, Qualified Adoption Expenses. This form is used to figure how much credit they can claim on their tax return.
  4. An eligible child must be younger than 18. If the adopted person is older, they must be unable to take care of themselves physically.
  5. This credit is non-refundable. This means the amount of the credit is limited to the taxpayer’s taxes due for 2021. Any credit leftover from their owed 2021 taxes can be carried forward for up to five years.
  6. Qualified expenses include:
    • Reasonable and necessary adoption fees.
    • Court costs and legal fees.
    • Adoption related travel expenses like meals and lodging.
    • Other expenses directly related to the legal adoption of an eligible child.
  7. In some cases, a registered domestic partner may pay the adoption expenses. If they 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.
  8. Expenses may also qualify even if the taxpayer pays them before an eligible child is identified. For example, some future adoptive parents pay for a home study at the beginning of the adoption process. These parents can claim the fees as qualified adoption expenses.

Questions about whether you qualify for the adoption tax credit? Help is just a phone call away.

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