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Adoption Tax Benefits

Qualified Adoption Expenses

Are you eligible for adoption tax benefits?

There are several available adoption tax credits and benefits that may be able to offset your qualified adoption expenses.

According to the information provided by the IRS, you can claim a credit based on your qualified adoption expenses!  The following link is a great resource that breaks down the adoption tax credit in detail with examples.

In January 2013, the Federal Adoption Tax Credit was made permanent. The adoption credit is not refundable, which means that only those individuals with tax-liability (taxes owed) will benefit.

Reasonable and necessary expenses paid to complete the adoption as long as those expenses are not reimbursed by your employer or the government. If your adoption-related expenses are less than $13,810, you claim only the amount of the expenses. If expenses exceed $13,810, the maximum you claim is $13,810 per child.

Qualified Adoption Expenses

For both the credit and the exclusion, qualified adoption expenses, defined in section 23(d)(1) of the Code, include:

Any expense may be a qualified adoption expense even if the expense is paid before an eligible child has been identified. For example, prospective adoptive parents who pay for a home study at the outset of an adoption effort may treat the fees as qualified adoption expenses.

  • Adoption Service Fees

    Agency fees, application, counseling, marketing, networking fees etc…

  • Court Cost

    Court cost, legal fees and or attorney fees

  • Travel Expenses

    Traveling expenses including hotel, car rental, flights and meals away from home.

  • Other Expenses

    Other expenses that are directly related to and for the principal purpose of the legal adoption of an eligible child, which include birth mom expenses.

Qualified adoption expenses

Any expense may be a qualified adoption expense even if the expense is paid before an eligible child has been identified. For example, prospective adoptive parents who pay for a home study at the outset of an adoption effort may treat the fees as qualified adoption expenses.

Claiming tax credit?

The tax year for which you can claim the credit depends on the following:

  • When the expenses are paid;
  • Whether it’s a domestic adoption or a foreign adoption; and
  • When, if ever, the adoption was finalized.
  • Tax Credit Income Limit

Adoption tax credit income

The adoption tax credit income limit is based on modified adjusted gross income (MAGI) and is recalculated each year based on current cost of living. For the 2018 Adoption Tax Credit, the maximum amount available will begin to phase out for families with MAGI above $207,580 and will be unavailable to families with incomes around $247,580 or above.

Adoptive parents who work for companies with an adoption assistance program also receive a tax break. Adoptive parents can receive up to $13,400 in reimbursement from their employer for adoption expenses.  Please make sure you are keeping accurate record on the reimbursement.  You cannot take a tax credit for expenses reimbursed by employers.

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