The Internal Revenue Service allows you to offset your tax bill with a credit for your qualified adoption expenses, as long as you meet certain eligibility requirements. To report your qualified adoption expenses, you'll use IRS Form 8839.
• If you paid qualified adoption expenses to adopt a child, you may be eligible for the adoption tax credit up to a maximum of $14,890 per child (tax year 2022).
• The adoption tax credit can reduce your tax liability, but you cannot receive a refund for the amount of the credit that exceeds your tax liability.
• If the entire credit is not used in the current tax year, any remaining amount can be carried forward for up to five years.
• The adoption tax credit begins to phase out when your modified adjusted gross income exceeds $223,410 and goes away completely when it exceeds $263,410.
Credit for an adoption
If you’ve adopted a child (or attempted to), you know it can be very expensive. The good news is the tax laws allow you to offset your tax bill with a credit for your qualified adoption expenses, as long as you meet certain eligibility requirements. To report your qualified adoption expenses, you’ll use IRS Form 8839.
Who is eligible?
If you paid qualified adoption expenses to adopt a child who is a U.S. resident or citizen, then you may be eligible for the credit, even if the adoption hasn’t been finalized or was finalized in a different tax year. You may also qualify for the credit if you paid expenses to adopt a foreign child. Additionally, there are separate rules to claim the credit on Form 8839 if you adopt a child with special needs.
For 2022 the maximum credit is $14,890 per child. The adoption tax credit is not a refundable credit. This means that in order to recognize the full benefit of the credit, your total tax must be at least equal to your credit. For example, if your total tax for the year is only $10,000 but you spend $14,000 in qualified adoption expenses, $10,000 is the most you can save in tax. However, if the entire credit is not used, any remaining amount can be carried forward to offset your future tax for up to five years.
Keep in mind, as your income goes up after a certain amount, your eligibility for the credit goes down. For tax year 2022, as long as your modified adjusted gross income is $223,410 or less, you can qualify for the full credit. The credit phases out as your income increases and goes away completely when it exceeds $263,410. There are also certain restrictions on claiming the credit for married couples not filing jointly.
TurboTax Tip: Qualified adoption expenses include fees you pay to an adoption agency, legal fees you pay to an attorney, court costs you incur, and may include travel expenses, including the cost of food and hotels when traveling away from home.
Qualified adoption expenses
Before you begin filling out Form 8839 with your qualified adoption expenses, it’s a good idea to familiarize yourself with the types of expenses the IRS considers qualified. Qualified adoption expenses include:
- The fees you pay to an adoption agency that facilitates the process
- Legal fees you pay to an attorney
- Court costs you incur and re-adoption expenses that relate to the adoption of a foreign child.
You may also include the necessary travel expenses you incur, including the cost of food and hotels when traveling away from home. Keep in mind, however, that you may not include amounts your employer reimburses, fees you pay to a surrogate mother, or any expenses that relate to the adoption of your spouse’s child.
Form 8839 reporting
Once you calculate your qualified adoption expenses, you enter information about the adopted children in Part I, calculate the amount of the adoption credit in Part II, and enter information about any employer-provided adoption benefits in part III.
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