What is the u.S. adoption tax credit?

The federal Adoption Tax Credit provides tax relief for adoptive families for expenses incurred during the adoption process (with many caveats). The Tax Credit can be taken either in the year the expenses are paid, or in the year the adoption is finalized, and may also be taken for failed adoptions. However, adoptive parents cannot take the Tax Credit for more than the maximum per adoption process even if it is taken over more than one tax year. The tax credit does not apply to step-parent adoption or adult adoptions, unless the “child” is physically or mentally incapable of self-care.

Qualified expenses include the following:

  1. Adoption Fees: Costs paid to an adoption agency or attorney for the services required to complete the adoption.

  2. Court Costs and Legal Fees: Expenses related to legal proceedings for the adoption.

  3. Travel Expenses: Necessary travel expenses, including meals and lodging, while away from home to complete the adoption process.

  4. Other Costs: Related expenses such as home study fees and other administrative costs.

Income Limitations: The credit begins to phase out for individuals or couples with modified adjusted gross income (MAGI) above a certain threshold. For tax year 2024, the phase-out starts at $223,410 and is completely phased out at $263,410.

The Tax Credit amount for 2024 is a maximum credit of $15,950 per child.

Learn more at the IRS’s website: https://www.irs.gov/taxtopics/tc607