Are Adoption Fees and Costs Tax Deductible?
Understand the key difference between a tax deduction and the more impactful Adoption Tax Credit to manage the financial aspects of growing your family.
While adoption fees and related costs are not deductible, they form the basis for the Adoption Tax Credit. A tax deduction reduces your total income that is subject to tax, while a tax credit provides a more direct benefit by reducing your final tax liability on a dollar-for-dollar basis. This distinction is important for families managing the cost of adoption.
The credit is nonrefundable, which means it can lower your tax obligation to zero, but you will not receive any portion of it back as a refund. The structure of this benefit is designed to directly offset the taxes you owe after incurring adoption-related expenditures.
Eligibility for the Adoption Tax Credit
To claim the Adoption Tax Credit, both the adoptive parent and the child must meet specific criteria set by the Internal Revenue Service. For the taxpayer, eligibility is tied to income. For the 2025 tax year, the credit begins to phase out for taxpayers with a Modified Adjusted Gross Income (MAGI) between $259,190 and $299,190. If your MAGI is above $299,190, you cannot claim the credit. These income thresholds are indexed for inflation and adjust each year.
The filing status of the taxpayer is another factor. Married couples who wish to claim the credit must file a joint tax return, as the “Married Filing Separately” status disqualifies a taxpayer from taking the credit.
The definition of an “eligible child” is also specific. The child must be under 18 years of age at the time of the adoption. An exception exists for individuals who are physically or mentally incapable of self-care. The rules also establish a distinct category for a “child with special needs,” a determination made by a state or county child welfare agency that has favorable implications for how the credit is calculated.
Qualified Adoption Expenses
The foundation of the Adoption Tax Credit is the set of “qualified adoption expenses,” defined by the IRS as reasonable and necessary costs directly related to the legal adoption of an eligible child. The list of qualified expenses is comprehensive and includes:
- Adoption fees paid to an agency
- Court costs and attorney fees
- Traveling expenses, such as airfare, gas, and lodging, if the primary purpose of the trip is the adoption
- Meals consumed during adoption-related travel
It is also important to understand what costs do not qualify. Expenses incurred to adopt the child of one’s spouse, commonly known as a stepparent adoption, are explicitly excluded. Any costs associated with a surrogate parenting arrangement are also not permitted. The credit cannot be claimed for any expense that violates state or federal law.
You also cannot claim the credit for expenses that were paid for or reimbursed by another party. This includes funds from an employer’s adoption assistance program or grants from government agencies or other organizations. If you attempt an adoption that is ultimately unsuccessful, you may still be able to claim the credit for the expenses you incurred.
How to Claim the Adoption Tax Credit
Preparation and Calculation
The first step in claiming the credit is to calculate the total based on your qualified expenses and the annual limit. For the 2025 tax year, the maximum credit is $17,280 per child. This is a per-child limit, not a per-year limit, meaning all expenses for a single adoption are subject to this one cap, even if they span multiple years. You will use IRS Form 8839, “Qualified Adoption Expenses,” to figure your exact credit amount.
A special rule applies to the adoption of a child who a state has determined to have special needs. In these cases, the taxpayer is eligible to claim the full maximum credit amount for that year, regardless of whether their documented expenses reached that level. Before filing, you must gather and retain supporting documents, including the final adoption decree, any placement agreements from the adoption agency, and detailed receipts for all claimed expenses.
Filing and Post-Filing Actions
Once you have gathered your documents and completed Form 8839, the next step is to attach it to your primary federal income tax return, Form 1040. The calculated credit from Form 8839 will transfer to your Form 1040, where it directly reduces your total tax liability. You must ensure the child’s taxpayer identification number is correctly entered; if the child does not yet have a Social Security Number, you may need to use an Adoption Taxpayer Identification Number (ATIN).
Because the Adoption Tax Credit is nonrefundable, your credit is limited to your tax liability for the year. If the credit you are entitled to is greater than the amount of tax you owe, the IRS allows you to carry forward any unused portion of the credit for up to five years. This carryforward provision ensures that you have the opportunity to use the full value of the credit, applying it against your tax liability in subsequent years until it is exhausted or the five-year period expires.