How to Use the Adoption Credit Form to Claim Tax Benefits

Adopting a child can be expensive, but the federal adoption tax credit helps offset some of these costs. This credit allows eligible taxpayers to reduce their tax bill based on qualified adoption expenses, potentially saving thousands of dollars.

To claim this benefit, taxpayers must submit Form 8839, Qualified Adoption Expenses, with their tax return. Filing correctly ensures the maximum credit while avoiding errors that could delay processing.

Who May Claim the Credit

Eligibility depends on the type of adoption and the taxpayer’s income. U.S. citizens and resident aliens who incur qualified adoption expenses while adopting an eligible child can claim the credit. This applies to domestic, international, and special needs adoptions, though the timing of when the credit can be claimed varies.

For domestic adoptions, expenses can be claimed in the year after they are paid, even if the adoption is not finalized. For international adoptions, the credit is available only in the year the adoption is completed. If adopting a child with special needs, the full credit amount may be claimed regardless of actual expenses, provided the adoption is finalized and the child meets state adoption assistance criteria.

Income limits also apply. The credit begins to phase out for taxpayers with a modified adjusted gross income (MAGI) above a certain threshold, which is adjusted annually for inflation. In 2024, the phase-out starts at $252,150 and is eliminated at $292,150. Taxpayers above this range cannot claim the credit.

Qualifying Expenses

Only costs directly related to the legal adoption process qualify. These include adoption agency fees, legal and court costs, and home study fees. Necessary travel expenses, such as transportation and lodging, may also qualify.

Medical expenses for the child generally do not qualify unless required for the adoption process, such as mandatory medical exams. Foreign adoptions often involve translation services and document authentication, but only expenses necessary for legal approval are eligible. Donations to adoption organizations or personal gifts to birth parents do not qualify.

Employer-provided adoption assistance affects the credit. If an employer reimburses adoption costs under a qualified adoption assistance program, those amounts cannot be claimed for the tax credit. However, the employer benefit itself may be excluded from taxable income, providing a separate tax advantage.

Calculating the Amount

The adoption tax credit is non-refundable, meaning it can reduce tax liability to zero but does not result in a refund if the credit exceeds the amount owed. Any unused portion can be carried forward for up to five years.

For 2024, the maximum credit per adopted child is $16,810. The amount a taxpayer can claim depends on total qualified adoption expenses and income eligibility. If expenses exceed this limit, the credit is capped at the maximum amount. If expenses are lower, only the amount spent can be claimed. Keeping detailed records ensures all eligible costs are accounted for.

Documentation

Proper documentation is required to substantiate the credit. Taxpayers must retain copies of final adoption decrees, placement agreements, and court orders. If the adoption is pending, receipts for agency fees or legal retainers may be necessary.

Financial records, such as canceled checks, credit card statements, and itemized invoices, should be kept to verify each qualified expense. Any reimbursed expenses must be documented to avoid mistakenly including them in the credit calculation. Maintaining a spreadsheet categorizing each cost by date and type can simplify tax filing.

For international adoptions, additional documentation may be required, such as translated legal documents and proof of compliance with U.S. immigration laws. The IRS may request certified copies, so obtaining them at the time of adoption can prevent delays.

Submitting the Form

Once documentation is gathered, taxpayers must complete Form 8839 and file it with their federal tax return. This form requires details such as the adopted child’s name, birth year, and taxpayer identification number (TIN) or Social Security number. If the adoption is not finalized, a temporary adoption taxpayer identification number (ATIN) may be required.

Each section of Form 8839 must be completed accurately. Taxpayers must list all qualified adoption expenses, subtract any employer-provided adoption benefits, and calculate the final credit amount. Errors, such as missing identification numbers or miscalculating expenses, can lead to processing delays. Since the credit is non-refundable, any unused portion must be correctly carried forward to future tax years. Filing electronically can help reduce errors, but if additional documentation is required, such as for special needs adoptions, a paper return may be necessary.

Adjusting the Return

If a previously claimed adoption tax credit needs to be adjusted due to new expenses, income changes, or IRS corrections, an amended return may be required. Taxpayers can use Form 1040-X, Amended U.S. Individual Income Tax Return, to update their filing. This is relevant if additional adoption costs were incurred after the initial return was submitted or if a pending adoption has since been finalized.

Supporting documentation must be included to justify changes, such as updated receipts or court documents. If the adjustment increases the credit, the taxpayer may receive a refund or have more of the credit carried forward. Given the complexity of amending tax filings, consulting a tax professional can help ensure accuracy and avoid IRS scrutiny.