Who can claim and how much?

Many people may not know that they can receive credits if they adopt a child. This federal adoption tax credit could amount to more than $16,000 per eligible child in 2024. The purpose of this deduction is to offset the high costs of adopting a child.

Federal Adoption Tax Credit: Who Can Claim It?

U.S. tax law allows adoptive families to receive tax benefits for all qualified expenses incurred during the adoption process. According to the IRS, taxpayers can apply this deduction to “international, domestic, private, and public foster care adoptions.”

To qualify for the federal adoption tax credit, you must meet the following requirements:

• You must have been in foster care, a relative’s child, internationally, or privately adopted a child (not a stepchild) in the United States (except your spouse’s child). If you adopt a child in the United States, you may also be able to claim costs for failed or unconfirmed adoption, but you must wait one year after the costs are incurred to claim them.
• The child you are adopting must be under 18 years of age or physically or mentally unable to care for themselves.

Taxpayers must complete Form 8839 (Qualified Adoption Expenses) to determine the amount of the credit they can claim. The federal adoption tax credit is non-refundable, but unused credit can be carried forward for up to five years.

How much can I get?

Eligible expenses include adoption fees, legal fees, travel costs associated with adoption, and other expenses directly related to the legal adoption of an eligible child.

Additionally, expenses that the state requires you to spend as a condition of adoption, such as building a fence around a swimming pool, may be tax deductible. If you adopt a child with special needs, you can claim the full deduction even if you haven’t spent the full cost.

For 2024, the federal adoption tax credit is up to $16,810. The credit amount generally increases each year, with the amount of the increase dependent on a “cost of living” calculation. The maximum credit for 2023 was $15,950.

Additionally, the income criteria to receive the credit changes each year depending on the cost of living. In 2024, the full credit becomes available to people with modified adjusted gross income (MAGI) of $252,150 or less.

If your MAGI is more than $252,150 but less than $292,150, your credit amount will be reduced. Anyone earning more than $292,150 is not eligible for the 2024 federal adoption tax credit. In 2023, income ranged from $239,230 to $279,230.

According to data from wearefamiliesrising.org, families with adjusted gross incomes of less than $30,000 have no federal tax liability and therefore are unlikely to receive the credit. On the other hand, families with an AGI of $100,000 or more are more likely to use most of their credit.