The Qualifications for an Adoption Tax Credit
How to Claim the Adoption Tax Credit in 2019 and 2020
Taxpayers who adopt a child can qualify for the adoption tax credit when they pay out-of-pocket expenses related to the adoption. These expenses can include adoption fees, court and attorney fees, and travel expenses, and the amount of the tax credit is directly related to how much is spent.
Adoption Tax Credit Amounts
The adoption tax credit is adjusted for inflation, so it increases periodically. The credit amount is for each eligible child, and they're listed below by year:
- 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 expenses because your credit is limited to the amount of your expenses. Likewise, you would be limited to a credit of $14,080 even if you spent $20,000 on qualified expenses, subject to certain income phaseouts, and with one exception. 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.
The credit is non-refundable, so it can erase any tax liability you owe to the IRS, but you won't receive direct compensation if the credit is more than this amount. For example, if you owe $10,000 to the IRS but qualify for the full $14,080 tax credit, you will still only receive credit for $10,000. However, any excess credit can be carried forward for up to five years, so the remaining $4,080 can still be claimed in later years.
The adoption tax credit phaseout 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 to determine the phaseout range for the adoption credit. The IRS provides a worksheet for figuring out 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, and your credit begins reducing in value at the first threshold. For example, you can only claim a portion of the credit if your MAGI fell between $211,160 and $251,160 in 2019, and the more you earn, the less of a portion you can claim. IRS Form 8839 walks you through the calculations if your MAGI exceeds the lower threshold.
Other 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 physically or mentally incapable of caring for themselves.
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. Expenses for a failed adoption might qualify for the credit if a successful adoption follows it, but the two adoption efforts would be considered as one adoption and subject to the dollar limit per eligible child.
Special Needs Children
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 decide 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 claim the adoption credit in the year after your expenses were paid if they were paid before the adoption was final, and you can take it 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, however. In this case, you can take the adoption credit only in the year when the adoption becomes final, or you can take the 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.
IRS. "Topic No. 607 Adoption Credit and Adoption Assistance Programs." Accessed Feb. 11, 2020.
IRS. "Instructions for Form 8839 (2019)." Accessed Feb. 11, 2020.
IRS. "Form 8839." Accessed Feb. 11, 2020.
IRS. "Adoption Taxpayer Identification Number." Accessed Feb. 11, 2020.