Claiming the Federal Adoption Tax Credit for Adoptions Finalized from 2012 to 2016

Updated March 2017

Who Is Eligible for the Adoption Tax Credit?

You can claim the federal adoption tax credit if:

  • You adopted a child other than a stepchild. You can claim the credit if you adopted from foster care, adopted internationally, adopted a relative’s child, or adopted privately from US (except your spouse’s child). If you were adopting from the US, you can also claim the credit for expenses for a failed or non-finalized adoption, although you need to wait until a year after you incur the expenses.

AND

  • At the time of adoption, the child was under 18 (or physically or mentally unable to take care of him or herself).

How Does My Income Affect My Benefit?

How much you will benefit from the credit depends on your income and federal income tax liability—which is the amount you are responsible for in federal income taxes. Those who have lower incomes may not be able to use the credit and those with moderate incomes often can’t use the whole amount.

For those with higher incomes, the credit phases out. For 2016, those with adjusted gross incomes above $241,920 could not claim the credit; those with incomes from $201,920 to $241,920 could claim a portion of the credit.

How Much Can I Claim?

Adoptions from Foster Care When the Children Receive Adoption Assistance

When a child adopted from US foster care receives adoption assistance (also known as adoption subsidy) it is considered a special needs adoption for the purposes of the adoption tax credit, even if the child does not have a disability. Children with disabilities who do not receive adoption assistance/adoption subsidy benefits are not considered special needs for purposes of the adoption tax credit. Some private domestic adoptions may also receive adoption assistance and therefore be considered special needs for the adoption tax credit.

If you completed a special needs adoption from foster care (as defined above), you can claim the federal adoption tax credit even if you had no adoption expenses. (This doesn’t mean, though, that you will receive the full credit. How much you can actually receive still depends on your income as explained in the next section below.)

If you receive adoption assistance or adoption subsidy benefits for your child, you can claim the maximum credit ($13,460 per child for adoptions finalized in 2016) as your expenses, even if you had little or no expenses.

Other Adoptions

For all other adoptions (except those where you adopt your spouse’s child, which are not eligible for the credit), you must have qualified adoption expenses to claim the credit. These expenses are the costs associated with completing the legal adoption of a child, such as attorney’s fees, court costs, agency fees, homestudy costs, travel to complete the adoption, etc.

Will I Benefit From the Adoption Tax Credit?

What you can claim is different from how much you will actually be able to use. How much of the adoption tax credit you will actually use depends on your income and personal tax situation. Whether an adoption is considered special needs does not affect how much you will be able to benefit from the adoption tax credit. It only enables you to claim the full amount of the credit even if you did not have any expenses.

The adoption tax credit is a nonrefundable credit, which means it only offsets your federal income tax liability. Your income tax liability is the amount you are responsible for in federal income taxes for the year.

If you have ever done your taxes manually, your federal income tax liability is roughly the amount you would look up in the tax tables in the back of the instructions. If you want to see what your tax liability was in 2015, you can look at line 47 of Form 1040 (or line 30 of Form 1040A). If the line is blank or zero, you had no federal income tax liability. People with no tax liability will not benefit from the adoption credit this year. You can still file for the credit so you can carry it forward to future years if your tax situation changes. (Please note that the amount on line 47 is not exactly the amount you would benefit because there are some credits that come before the adoption credit.)

If you can’t use all of the credit in the year you claim it, you can carry the remainder forward for up to five more years to offset any of those years’ federal tax liability.

Data shows:

  • Families with adjusted gross incomes of less than $30,000 are not likely to benefit from the adoption tax credit at all because they do not owe any federal taxes.
  • Those making $30,000 to $50,000 will probably be able to use only a portion of the credit (maybe a few thousand), with the benefit spread out over six years.
  • Those making more than $100,000 can typically use most of the credit for one child in a year or two.

Adoption Tax Credit Basics

Amount of the Adoption Tax Credit

The adoption tax credit is a one-time credit and the amount you can claim depends on the year you finalized your child’s adoption.

Year of Adoption

Maximum Amount of
Credit per Child

2017 $13,570
2016 $13,460
2015 $13,400
2014 $13,190
2013 $12,970
2012 $12,650

 

When You Claim the Adoption Tax Credit

Domestic Adoptions

For a special needs adoption (adoption of a child from U.S. foster care who receives adoption assistance benefits), you claim the adoption tax credit the year it is finalized. So if you finalize in January 2016, you claim the 2016 adoption tax credit when you do your taxes for 2016 (typically early in 2017).

For other domestic adoptions, you can claim your qualified adoption expenses before the adoption is finalized, but you must wait a year after the expenses are incurred to claim the credit for a non-finalized adoption. So if you started the adoption process of a US child in 2014 and had expenses that year, you would claim them when you filed your taxes for 2015 (in early 2016). If the adoption then finalized in 2016, you would claim your 2015 and 2016 expenses with your 2016 taxes. The total maximum you could receive would be the 2016 limit, which is $13,460.

See the chart below:

If you had expenses…

Then take the credit…

Any year before the adoption becomes final The year after the year of the payment
The year the adoption becomes final The year the adoption becomes final
Any year after the year the adoption becomes final The year of the payment

International Adoptions

You cannot claim the adoption credit for an international adoption until the adoption is finalized.

If you had expenses…

Then take the credit…

Any year before the adoption becomes final The year the adoption becomes final
The year the adoption becomes final The year the adoption becomes final
Any year after the year the adoption becomes final The year of the payment

Exclusion

The law also allows adoptive parents whose employers offer an approved adoption assistance program to exclude any reimbursed expenses from their taxable income. Parents cannot claim the expenses for the exclusion and the credit. For example, a family spends $17,000 on their adoption, and the employer reimburses $10,000 through an approved adoption assistance program. The family can exclude the $10,000 from their taxable income, and claim only the remaining $7,000 for the adoption credit.

Those who adopt children with special needs can use the maximum amount of the exclusion ($13,460 for 2016) regardless of any expenses or reimbursement as long as their employer offers a qualified adoption assistance program.

Please review the instructions for Form 8839 for more information on the exclusion.

How to Claim the Adoption Tax Credit

Because each year is slightly different, follow the links below to learn how to claim the credit for the year you adopted.

  • If you adopted in 2016 you will claim the credit when you file your 2016 taxes in 2017.
  • If you adopted in 2015 you need to first amend or file your 2015 taxes.
  • If you adopted in 2014 you need to first amend or file your 2014 taxes.
  • If you adopted in 2013 or 2012 Because 2012 and 2013 are now closed tax years, you cannot receive any refund you were due for either year. BUT you can still amend your 2012 and 2013 taxes and claim the credit in order to carry any remaining benefit of the credit forward to 2014 and other open tax years. Any amount you would have received with your 2012 or 2013 taxes will be lost to you (for a 2013 adoption if you filed for an extension in 2013, you would receive any 2013 tax benefit up to October 15, 2017).
  • If you adopted in 2011 or earlier — Tax years 2011 and earlier are closed so anyone who finalized an adoption in 2011 or earlier is no longer able to claim an adoption tax credit.

Other Resources

Browse Other “Adoption Tax Credit” Related Content:

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