Adoption Credit

ADOPTION BENEFITS

There are two adoption benefits available:

• A nonrefundable credit of up to $16,810 (for 2024, amounts change based on inflation)- Qualified adoption expenses can reduce your tax liability to zero, but if the credit exceeds the tax liability the taxpayer is not provided a refund of excess adoption expenses.

• An exclusion from income of up to $16,810 (for 2024, amounts change based on inflation - For qualified expenses paid for by an employer under an adoption assistance program (check with your employer to determine if they provide this benefit). Employer Adoption Assistance is included on the W-2 but is excluded from taxable income. 

Eligibility for this credit is dependent on your modified adjusted gross income, amounts changing annually due to inflation.

Qualified Expenses can include:

• Adoption Fees

• Court Costs

• Attorney Fees

• Travel, including meals and lodging while away from home

• Re-adoption expenses to adopt a foreign child under state law

Qualified Expenses do NOT include:

• Any expenses which may be a violation of Federal Law

• Incurred in surrogate parenting arrangements

• Incurred while adopting a spouse’s child

• Paid using Federal, State, or local program funds

• Claimed as a deduction or credit elsewhere on the tax return

Example: In 2012 Jim and Kelly, who live in Georgia, adopt a child born in California.

Expenses incurred:

• $7420 adoption agency fees

• $600 kennel fees for the birth mother’s dog while she was in the hospital

• $765 court and attorney’s fees

• $1100 supplies for the new baby (i.e. baby clothes, crib, safety supplies, etc.)

• $1440 travel expenses during pick up (i.e. airfare, rental car, hotels, and meals)

Total deductible expenses: $7420 + $765 + +$1440 = $9,625

Total Non-Deductible Expenses: $600 + $1100 = $1,700

These deductible expenses would be applied to the 2012 tax year as long as the adoption was finalized in 2012.

If you have specific questions about the adoption tax credit or adoption, please give us a call. The partners in our office have adopted a total of six children, we have been in your shoes let us help.