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  5. Video: Tax Credits When Adopting a Child

Video: Tax Credits When Adopting a Child

Updated for Tax Year 2022 • December 1, 2022 09:07 AM


OVERVIEW

If you are in the process of adopting a child or even considering it, you should know that there is a federal tax credit that can save you money on your taxes. Some of the adoption expenses that qualify for the credit include court and attorney fees, traveling expenses, adoption agency fees and any other expenses directly related to legally adopting an eligible child. Watch this tax tip video from TurboTax to learn more about qualifying for the federal adoption tax credit.


TABLE OF CONTENTS

Video transcript:

Hi, I'm Richard from TurboTax.

If you are in the process of adopting a child or even considering it, you should know that there is a federal tax credit that can save you money on your taxes.

Some of the adoption expenses that qualify for the credit include:

  • court and attorney fees,
  • traveling expenses
  • adoption agency fees
  • and any other expenses directly related to legally adopting an eligible child

However, if your employer reimburses or pays you for any of the costs, you can't include that in your credit. This also applies to financial aid you receive from the government or other organizations.

The total credit you can apply for is limited by your total income. It's also cumulative.

  • In other words, if you are eligible to claim $5,000 in one year, you can only claim the remaining amount of the credit in future years.
  • See the TurboTax article “New Addition: Adoption Tax Credits” for the current limits.

The credit is nonrefundable, meaning that it’s limited to your total tax liability for the year, and you will not receive a refund check if the credit exceeds that amount.

  • But any credit in excess of your tax liability may be carried forward for up to five years.

If you are adopting an eligible child who is a US citizen or US resident, then adoption expenses paid before the year the adoption becomes final should be claimed in the year after you paid them.

  • The only exception is if you paid in the year the adoption was finalized or afterwards. Then you can claim those expenses in the same year you paid them.

For foreign adoptions, you can only claim the credit during the year the adoption is finalized or the year of payment at the time the adoption is finalized.

One more thing! You can still take the adoption credit, even if you never finalize the adoption.

  • However, you will only qualify for the credit in this situation if the child you try to adopt is a U.S. citizen or resident.

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