Adopting a Child What the 2018 Adoption Tax Credit Means to You

Itemizing versus Standard Deduction

If you or someone you know are thinking about adopting a child, you’ll want to be aware of the 2018 adoption tax credit to offset the costs of the adoptive process.

The 2018 federal adoption tax credit is $13,840 and is a subsidy rather than a deduction (more on the difference here). This means that it is a dollar-for-dollar reduction of total tax liability that goes straight into the pocket of prospective adoptive parents.

Ruled in 2013 as a permanent tax credit, it’s intended to climb each year in accordance with the cost of living. Currently the adoption tax credit is available in full to prospective parents with modified adjusted gross incomes of equal to or less than $207,580. Those with modified adjusted gross income in excess of $207,580 but less than $247,580 are eligible for a reduced tax credit. Those with modified adjusted gross income equaling or exceeding $247,580 forfeit eligibility.

The adoption tax credit may be applied only toward any qualified adoption expenses, including adoption agency, court, and attorney fees or any expenses related directly to the adoptive process, such as travel and lodging costs. Regardless of whether the expenses are incurred in a domestic or international adoption, eligibility is the same. Further, adopting a child with special needs allows prospective parents to claim the entire tax credit even if adoption expenses have been less than $13,840.

The adoption tax credit can be claimed in the year following adoption expenses if the child is U.S.-born or a resident alien. However, if the adoption is finalized in the same year in which the expenses were incurred, the tax credit may be claimed in that year. For expenses incurred in the year following the finalization of the adoption, the tax credit may be claimed in the year the expenses were incurred. The tax credit may be claimed in international adoptions only  after finalization.

Even if a prospective parent’s attempt to adopt is unsuccessful, they are still eligible to claim the tax credit to reimburse the costs of trying. So long as the adoption is domestic, costs incurred in the attempt to adopt are treated by the IRS in the same way as costs incurred in adoptions that are successfully finalized. Unlike domestic adoptions, international adoptions must be successfully finalized to claim the tax credit.

To claim the adoption tax credit, prospective parents must complete Form 8839 “Qualified Adoption Expenses” and include the form with their Form 1040 or Form 1040A. Generally speaking, for married couples to claim the tax credit they must file jointly. Proof of qualified expenses must be documented and submitted to the IRS, so retention of adoption-related receipts, invoices, and financial records is critical.

Though adoption may be a challenging process, filing your taxes shouldn’t be. Whatever your filing status, at you’ll find ease of access, filing simplicity, and free professional tax support to ensure that as a prospective adoptive parent you receive the qualifying adoption tax credit to offset the expense of what may be your most important quest.