Video transcript:
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 the 2024 tax year is $16,810 per child, and that's cumulative.
So, for example, if you claimed $5,000 in adoption expenses for a child on your 2023 tax return, you’re only eligible to claim a maximum of $11,810 for the same child on your 2024 return. The 2024 credit also starts to phase out once your modified gross adjusted income reaches $252,150 and is no longer available after it reaches $292,150. 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. For more information about this and other tax topics, visit TurboTax-dot-com.
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