Nationwide Adoption Facilitator
Information and Help for Adoptive Parents
Unique Adoptions is a nationwide adoption facilitator based in Murrieta, CA. We offer help for adoptive parents as well as important information, such as tax credit details and where to start with adoptions. Our adoption facilitating service provides you with the best adoption help and answers to all of your questions.
Federal Adoption Tax Credit NOTICE
This is not legal advice and should not be relied upon without first consulting your adoption attorney.
This adoption tax credit is more valuable than a tax deduction because it provides help for adoptive parents, and allowable expenses are subtracted dollar for dollar against your tax liability. For example, if you owe $5,000 in federal taxes and have $3,000 in qualified adoption expenses, your tax bill is reduced to $2,000. If your tax bill is smaller than the credit, the unused portion of the credit may be carried forward for up to five years.
According to IRS Publication 968, qualified expenses include “reasonable and necessary” adoption fees, attorney fees, and some travel costs, including necessary transportation, meals, and lodging. Expenses related to surrogate parents or adopting a spouse’s child do not qualify for the credit. The credit also does not apply to expenses reimbursed by the government or private programs or for which an income tax deduction or credit already is allowed. Adoptive parents should carefully review the IRS guidance, preferably with a tax professional, to clarify what expenses qualify for the credit according to IRS guidelines.
Adoption Tax Credit (contributed by Mark McDermott from the American Academy of Adoption Attorneys; Susan Stockham from the American Academy of Adoption Attorneys; and Mike Roush, Lobbyist for the American Academy of Adoption Attorneys)
The adoption expense tax credit and the exclusion of income from employer adoption programs were modified and made permanent as part of the tax bill signed by the President on June 7, 2001. Below is information that provides help for adoptive parents explaining the changes to the adoption tax credit. The answers are based on past IRS guidance and best conjecture and do not reflect official Treasury Department policy since the IRS has not had a chance to issue new guidelines.
Updated February 2020
For adoptions finalized in 2020, there is a federal adoption tax credit of up to $14,300 per child. The 2020 adoption tax credit is NOT refundable, which means taxpayers can only use the credit if they have federal income tax liability (see below).
The credit applies one time for each adopted child and should be claimed when taxpayers file taxes for 2020.
To be eligible for the credit, parents must:
Have adopted a child other than a stepchild - A child must be either under 18 or be physically or mentally unable to take care of him or herself.
Be within the income limits - Income affects how much of the credit parents can claim. In 2020, families with a modified adjusted gross income below $214,520 can claim full credit. Those with incomes from $214,520 to $254,520 can claim partial credit.
The Amount of Credit to Be Claimed
Families who finalize the adoption of a child with special needs in 2020 and fulfill the eligibility requirements above can claim the full credit of $14,300 whether or not they had any expenses. (This doesn’t mean they will actually receive a refund - claiming is different from being able to benefit. See below.)
Example - A woman adopts three of her grandchildren from foster care, and the state paid all of the fees. All three children receive monthly adoption assistance benefits and thus are considered special needs. Because the grandmother earns less than $211,160, she can claim the full credit of $14,300 per child for a total of $42,900
Other adopters can claim a credit based on their qualified adoption expenses, which are the reasonable and necessary expenses paid to complete the adoption that have not been reimbursed by anyone else. If the expenses are less than $14,080, the adopters claim only the amount of those expenses. However, if the expenses exceed $14,300, the adopters can claim up to, but no more than, $14,300, per child.