Adoption Tax Credit

Since it was established in 1997, the Adoption Tax Credit has helped thousands of American families offset the high cost of adoption or meet their adopted children’s special needs.  Adoptive families are able to take a “credit” on their federal individual income tax returns in the year they finalize (1) if the family owes any federal taxes, and (2) if the family’s income is below a certain dollar amount.  In some cases, the family can take part of the total credit rather than the entire credit.  Also, the credit can be used for up to five years until a qualified family takes the entire dollar amount available to them.

As an example, here are the allowable amounts if an adoption is finalized in 2018: the maximum Adoption Tax Credit allowed is $13,840 (up from $13,570 in 2017).  Adoptive families with a modified adjusted gross income less than $207,580 can claim the tax credit, and those with an adjusted gross income between $207,580 and $247,580, have a sliding scale maximum allowed. Those with an adjusted gross income over $247,580 cannot claim the Adoption Tax Credit.

It is crucial for adoptive families to seek out expert tax advice on what expenses are allowable and how to properly claim them on a tax return.

What sorts of adoptions are eligible to take the Adoption Tax Credit? Both independent and agency adoptions qualify. Also both domestic and intercountry adoptions qualify. Kinship or family adoptions qualify. The only exception is step-parent adoptions; they do not qualify.