Everything You Need to Know About the Adoption Tax Credit [2024]

Having the family of your dreams is priceless, but the adoption process comes with cost. The U.S. government recognizes the efforts of adoptive families who pursue adoption to grow their family and give a child a better life by offering the adoption tax credit to eligible families.

The adoption tax credit aims to make adoption more accessible and affordable for families, helping you to bring a child into their home without the added stress of financial strain.

 The specifics of this credit change almost every tax year, so you’ll want to reference the Internal Revenue Service website for updated figures.

Whether you're starting to explore adoption or already navigating the process, American Adoptions of Colorado is here to provide clarity and support. Contact us today at 1-800-ADOPTION or fill out our online form to speak with an experienced adoptive family coordinator.

What Is the Adoption Tax Credit?

The Adoption Tax Credit is a federal benefit that allows adoptive families to minimize their tax liability. Adoption can be expensive, requiring the combined efforts of adoption specialists, attorneys, social workers and more. The U.S. government offers this tax credit to encourage adoption and ease the financial burden on adoptive parents.

The form for the Adoption Tax Credit is Form 8839. In 2024, you could claim up to $16,810 per child in eligible expenses. These expenses include adoption fees, court costs and legal fees, adoption-related travel expenses and other costs directly related to the legal adoption of a child. You can also exclude adoption expenses your employer covered from your income, but this contributes to the total credit.

It’s important to note that you must reduce the benefit each year by the amount of previously claimed adoption expenses for the same adoption opportunity. Wondering how to claim the Adoption Tax Credit in that case? Let’s say you paid $5,000 in 2022 to adopt a child and then finalized the adoption in 2024. Your maximum benefit for 2024 would be $11,810.

Who Qualifies for the Adoption Tax Credit?

The Adoption Tax Credit has an income limit. Anyone who has a modified adjusted gross income of less than $252,150 in 2024 qualifies for the full tax benefit. Otherwise, the credit phases out for incomes up to $292,150.

Generally, to qualify for the credit, your filing status must be single, head of household, surviving spouse or married filing jointly. If you’re married filing separately, you cannot claim the credit unless you lived separately from your spouse the last six months of the year, your child lived in your home for more than six months of the year or you covered more than half of your household expenses.

How Does the Adoption Tax Credit Work?

The tax year you can claim the adoption credit depends on when the eligible expenses were paid, whether it’s a domestic or international adoption and when the adoption was finalized.

In a domestic adoption, you can claim eligible expenses on the next year’s taxes. For instance, if you pay $5,000 in 2024, you can claim it on your 2025 tax return. Once the adoption is finalized, any expenses incurred can be claimed the same year. So, if finalization occurs in 2025 and you paid $10,000, you can claim that amount on your 2025 tax return.

The federal Adoption Tax Credit works differently for international adoptions. If the child you’re adopting isn’t a U.S. citizen, you can only claim the tax credit for adoption once the adoption is finalized. For example, starting the process in 2024 and finalizing in 2026 means you can claim all adoption expenses on your 2026 tax return.

Can You Claim the Tax Credit for a Failed Adoption?

Yes, you can claim a failed Adoption Tax Credit if the adoption opportunity doesn’t work out. However, you must add the qualified adoption expenses from any unsuccessful attempts to those of a later successful attempt.

For example, if you claimed $5,000 for an unsuccessful domestic adoption attempt in 2022, and spent $15,000 on a successful adoption that was finalized in 2024, the maximum credit you could claim for that year is $11,810. This means you can’t claim the remaining $3,190 of eligible expenses incurred in 2024.

How Many Years Can You Claim the Adoption Tax Credit?

The Adoption Tax Credit isn’t refundable, meaning you can't get a refund if it exceeds your tax liability. However, you can carry the unused credit forward for up to five years.

For example, if you spent $20,000 on a domestic adoption finalized in 2024, you can claim up to $16,810 on your 2024 tax return. If your tax liability is $10,000, you can use $10,000 of the credit to reduce your bill to zero and carry the remaining $6,810 forward.

Remember: This benefit is offered per child, so you can claim the full credit again if you adopt siblings or more children in the future.

Does Colorado Have an Adoption Tax Credit?

No, there isn’t a state-specific Colorado adoption tax credit. The state does offer assistance to families that adopt through foster care and a tax credit for employers that provide adoption assistance, but it doesn’t offer any adoption-related benefits to families pursuing domestic infant adoption.

Need Help Understanding Adoption Costs?

We recommend speaking with a tax accountant, tax advisor or tax consultant if you have questions regarding your specific situation. However, if you’re looking for more information about the cost of adoption, we can help. Our adoption specialists can provide you with a clear, honest cost estimate. Just call 1-800-ADOPTION or fill out our online contact form to get started.

Legal Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal, tax or financial advice. While we strive to provide accurate and up-to-date information, the laws and regulations surrounding tax credits can change, and individual circumstances may vary. We recommend consulting a qualified tax professional to obtain advice tailored to their specific situation. We are not responsible for any actions taken based on the information provided herein.

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