The Qualifications for an Adoption Tax Credit

How to Claim the Adoption Tax Credit in 2018 and 2019

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Taxpayers who adopt a child can qualify for the adoption tax credit when they pay out-of-pocket expenses related to the adoption. The amount of the tax credit is directly related to how much money you spend on adoption-related expenses, up to a limit.

You're entitled to claim the full amount of the adoption credit if you adopt a "special needs" child, even if your out-of-pocket expenses are less than the tax credit amount.

Adoption Tax Credit Amounts

This credit is adjusted for inflation, so it increases periodically. The credit is amount is for each eligible child.

  • 2019: $14,080, non-refundable
  • 2018: $13,810, non-refundable
  • 2017: $13,570, non-refundable
  • 2016: $13,460, non-refundable
  • 2015: $13,400, non-refundable
  • 2014: $13,190, non-refundable
  • 2013: $12,970, non-refundable
  • 2012: $12,650, non-refundable
  • 2011: $13,360, refundable
  • 2010: $13,170, refundable
  • 2009: $12,150, non-refundable
  • 2008: $11,650, non-refundable
  • 2007: $11,390, non-refundable
  • 2006: $10,960, non-refundable

You would not be eligible for the full $14,080 credit in 2019 if you had only $10,000 in qualifying expense. Your credit is limited to the amount of your expenses. You would be limited to a credit of $14,080 even if you spent $15,000 on qualified expenses, subject to certain income phaseouts, and with one exception.

Taxpayers who adopt a special needs child can claim the full amount of the adoption credit without regard to the actual expenses paid in the year the adoption becomes final.

The credit hasn't been refundable since 2011. It can erase any tax liability you owe to the IRS, but the IRS won't be sending you a check for any amount that's left over. You can, however, carry any leftover amount forward to a future tax year.

Adoption Tax Credit Phaseout Ranges

These ranges are based on modified adjusted gross income (MAGI), which many taxpayers find is the same as their adjusted gross incomes (AGI). Your MAGI is your AGI with a few add-backs, such as any tax-exempt interest you would not have included in your taxable income when you prepared your return.

Additionally, any income excluded from tax using the foreign earned income exclusion must be added back for the purposes of determining the phase-out range for the adoption credit.

The IRS provides a worksheet for figuring your modified adjusted gross income for the adoption credit in the Instructions for Form 8839.

These figures are also adjusted periodically to keep pace with the economy.

  • 2019: $211,160 - $251,160
  • 2018: $207,140 - $247,140
  • 2017: $203,540 - $243,540
  • 2016: $201,920 - $241,920
  • 2015: $201,010 - $241,010
  • 2014: $197,880 - $237,880
  • 2013: $194,580 - $234,580
  • 2012: $189,710 - $229,710
  • 2011: $185,210 - $225,210
  • 2010: $182,520 - $222,520
  • 2009: $182,180 - $222,180
  • 2008: $174,730 - $214,730
  • 2007: $170,820 - $210,820
  • 2006: $164,410 - $204,410

You can't claim the adoption credit if your MAGI exceeds the top phaseout figure—for example, $251,160 in 2019. Your credit begins reducing in value at the first threshold. You can only claim a portion of the credit if your MAGI falls between $211,160 and $251,160 in 2019, and the more you earn, the lesser of a portion you can claim.

IRS Form 8839 walks you through the calculations if your MAGI exceeds the lower threshold.

Other Adoption Tax Credit Eligibility Requirements

You must adopt an eligible child and pay qualified adoption expenses out of your own pocket to claim the adoption credit.

Eligible children include any child age 17 or younger, or a child of any age who is a U.S. citizen or a resident alien and who is physically or mentally incapable of caring for himself or herself.

Qualified adoption expenses are calculated by adding up all the expenses related to the adoption, then subtracting any amounts reimbursed or paid for by your employer, a government agency, or another organization.

Adoption expenses include any and all costs directly relating to your adoption that are reasonable and necessary. In other words, you would not have been able to adopt the child if you didn't pay these associated expenses. They include adoption fees, legal fees, court costs, and travel expenses.

Eligible expenses must be "directly related" to the adoption of the eligible child. Expenses for a failed adoption might qualify for the credit if they're followed by a successful adoption, but the two adoption efforts would be considered as one adoption and subject to the dollar limit per eligible child.

The editors of JK Lasser's Your Income Tax advise:

"You may not claim a credit for the costs of a surrogate parenting arrangement or for adopting your spouse's child."

Who Is a Special Needs Child?

For purposes of the adoption credit, special needs children are those who receive adoption assistance or adoption subsidy benefits, typically because they're in foster care. Benefits can include Medicaid or reimbursement of certain expenses and are received because the state considers that the child would not be adoptable if they weren't provided.

The state must also make a determination that the child can't be returned to the parents. The child might or might not have a physical, emotional, or mental handicap, but a disability alone won't qualify a child as special needs without these other factors being present. Nor does being in foster care automatically qualify a child as special needs.

When to Claim the Adoption Credit

You can take the adoption credit in the following years if the child is a U.S. citizen or a resident alien:

  • You can claim the adoption credit in the year after your expenses were paid if they were paid before the adoption was final.
  • You can take the adoption credit in the same year for expenses that were paid that year if the adoption was final that year.
  • For expenses paid in the year after the adoption is final, you take the adoption credit in the year the expenses were paid.

Different rules apply if the child is a foreign national. In this case, you can take the adoption credit only in the year when the adoption becomes final, or you can take a credit for expenses in the year that you paid them if they were paid in the year after the adoption was finalized.

You must apply for an Adoption Taxpayer Identification Number (ATIN) to begin claiming your adopted child as a dependent if the child doesn't yet have a Social Security number. The IRS provides comprehensive information about the ATIN on its website.

Carrying Forward the Adoption Credit

Any adoption credit claimed in the year 2012 or later that's in excess of your federal tax liability can be carried forward to the subsequent tax year. Excess adoption credits can be carried forward for up to five years until the leftover amount is used up on a first-in, first-out basis.

You can calculate your adoption credit on IRS Form 8839 Qualified Adoption Expenses, which you must file with your tax return.