Adoption Tax Credit (Tax Year 2024)

Quick Facts

Maximum credit: $16,810 per eligible child for expenses paid in 2024, adjusted annually for inflation.
Refundability: Nonrefundable, but unused credit can be carried forward for up to five additional tax years.
Income phaseout: Credit begins to phase out when modified AGI exceeds $252,150 and is fully phased out at $292,150 for married filing jointly or single filers.
Special needs adoptions: Families adopting a child with special needs from foster care can claim the full credit regardless of actual expenses once the adoption is finalized.
Primary references: IRS Adoption Credit overview, Form 8839 instructions, and Revenue Procedure 2023-34.

Program Overview

The federal adoption tax credit offsets the often substantial costs of adopting a child. Qualifying expenses include agency fees, court costs, attorney fees, travel, and other direct expenses related to a legal adoption. The credit is available for adoptions of U.S. citizens, residents, or foreign nationals, though timing rules differ for international adoptions. When adopting a child with special needs through a state foster care system, families can claim the full credit even if their out-of-pocket costs are minimal, recognizing the long-term commitment involved.

Qualified Adoption Expenses

Examples of qualified expenses include:

Adoption agency and placement fees.
Legal fees, court costs, and attorney expenses.
Necessary travel expenses (including meals and lodging) while away from home for adoption purposes.
Home study expenses, background checks, and required training fees.
Reasonable costs of re-adoption for foreign adoptions.

Expenses that do not qualify include surrogate parenting arrangements, steps to adopt a spouse’s child, or payments for services that violate state or federal law. Expenses reimbursed by an employer, covered by a state program, or paid using funds from any government assistance cannot be claimed for the credit, though employer-provided adoption assistance may qualify for a separate income exclusion.

Timing Rules

The year in which you can claim the credit depends on the adoption type:

Domestic adoption (U.S. child): Qualified expenses can be claimed for the year after they are paid, even if the adoption is not finalized. Expenses paid in 2024 for a domestic adoption that is still in progress may be claimed on the 2025 return, while expenses from 2023 that were carried forward can be claimed on the 2024 return. Once the adoption is finalized, expenses paid in the same year may be claimed that year.
International adoption: You can claim the credit only in the year the adoption becomes final. Expenses paid in earlier years must wait until finalization.
Special needs adoption: Once finalized, claim the full credit in that year without substantiating expenses, but keep documentation of the state’s determination of special needs.

Claiming the Credit

Gather documentation: Maintain receipts, contracts, court orders, and agency statements. State or county special needs determinations should specify that the child cannot or should not return to the birth parents and that the child probably would not be placed without assistance.
Complete Form 8839: Report each child’s information, qualified expenses, and adoption status. The form calculates the allowable credit and any employer adoption assistance exclusion.
Carryforward planning: If the credit exceeds your tax liability, record the remaining balance in Part III of Form 8839 to carry forward. Track the carryforward each year until it is used or expires after five years.
Attach to Form 1040: Form 8839 feeds into Schedule 3, line 6, and then to Form 1040, line 20.

Coordinating with Employer Benefits

Many employers offer adoption assistance programs that reimburse part of the costs. These payments can be excluded from income up to the same maximum as the credit ($16,810 per child for 2024). However, amounts excluded from income reduce the expenses eligible for the credit. Families should decide how to allocate expenses between the exclusion and the credit to maximize tax savings. For example, if employer assistance covers $10,000, only the remaining $6,810 of qualified expenses can be used toward the credit.

Planning Strategies

Document early and often: Adoption proceedings may span multiple years. Keep digital copies of receipts and legal documents. Note the date each expense was paid, which child it relates to, and whether it was reimbursed.
Monitor income: If your MAGI is near the phaseout threshold, consider timing income (such as bonuses) or increasing retirement contributions to stay below the limit.
Leverage state incentives: Many states provide additional tax credits or reimbursements for adoption; coordinate these with the federal credit.
Use the credit with other benefits: Families adopting from foster care may also qualify for state subsidies or Medicaid coverage; the federal credit does not reduce eligibility for these programs.

Insider Tips to Win Adoption Tax Credit

Retain qualified adoption expenses. Keep invoices, legal bills, and agency statements that match the definition on IRS Form 8839.
Coordinate with employer benefits. Deduct employer-provided adoption assistance from your claimed credit to avoid double counting.
File electronically with ITIN updates. Ensure adopted children’s Social Security numbers or ATINs are secured before filing to prevent processing delays.

Common Pitfalls

Incomplete documentation: The IRS often requests proof of expenses. Failure to supply receipts or legal documents can delay the refund or result in denial.
Claiming in the wrong year: Pay close attention to domestic versus international timing rules to avoid amended returns.
Miscalculating carryforward: Track unused amounts each year; the IRS provides worksheets in Form 8839 instructions.
Overlooking special needs determination: Some families qualify for the full credit but fail to claim it because they do not realize their child has a state-issued special needs designation.
Confusing employer benefits: Remember that employer reimbursements reduce eligible expenses for the credit, though they may still be excluded from income.

Frequently Asked Questions

Can single parents claim the adoption credit? Yes. The credit is available to single filers, married couples filing jointly, and certain head-of-household filers. Married individuals must file jointly to claim the credit.

What if the adoption fails? For domestic adoptions, expenses from an unsuccessful attempt can still be claimed in the year after they were paid. International adoption expenses only qualify if the adoption is ultimately finalized.

Do kinship adoptions qualify? Yes. Adopting a niece, nephew, or grandchild qualifies as long as the adoption is legal and meets state requirements. Adopting a spouse’s child does not qualify.

How long can I carry forward unused credit? Up to five additional years. Track remaining amounts carefully to ensure none are lost after the carryforward period ends.

Is the credit refundable? No. Any amount exceeding your tax liability carries forward but does not result in a refund in the year claimed.