Answers to Six Common Questions about the Adoption Tax Credit

Taking advantage of tax credits can greatly reduce adoption expenses, even after you have your baby. Changes to the law allow the credit to adjust each year based on the fed’s cost-of-living calculation for the year of adoption finalization.

For adoptions finalized in 2023 (tax returns claimed in 2024), the maximum amount a family can receive as credit is $15,950 per adopted child. Next year it will be higher.

Summary of Credit by Year Finalized:

Unlike a tax deduction, which lowers gross income, a tax credit is a dollar-for-dollar reduction in tax liability. Depending on the annual tax liability, you may receive back 100% of the taxes withheld from your paycheck. If the credit exceeds your annual tax liability, you can carry forward the credit balance for up to 5 years.

1. How Do I Make Sure I Get Every Penny?

The secret to being reimbursed for the maximum you are eligible is good record keeping and holding onto expense receipts. While some adoptive parents will be fortunate enough to have all of their expenses occur during the calendar year of adoption finalization, most will have expenses that fall outside of the finalization year. When this happens, you risk forgetting pre-finalization expenses from a year or more prior.

2. When Can I Claim the Adoption Tax Credit?

The short answer is right now. Any adoption expenses incurred in 2022 for adoptions that were finalized in 2023 should be claimed on the 2023 tax return. In addition, adopting parents do not have to wait for finalization to access the credit when seeking to adopt a U.S.-born child. Qualifying adoption expenses can be claimed on tax returns the year after the expense is incurred. This means that even if you do not complete the adoption process or your adoption takes longer than average, you can be reimbursed for qualifying expenses along the way.

The adoption tax credit can only be claimed after the adoption is finalized for international adoption.

3. What if I Was Previously Eligible for the Adoption Tax Credit and Did Not Claim it in the Year of Eligibility?

You may be eligible to file an amended return to claim the Adoption Tax Credit for previous years. Consult a qualified tax attorney, CPA or licensed tax professional to determine specific eligibility.

4. What Are Qualifying Adoption Expenses?

According to the IRS, any adoption expenses must be reasonable, necessary and directly related to the child’s adoption. Qualified expenses are any expenses necessary for the adoption. For example, court fees, agency fees, attorney fees, dossier, travel and meals, and any other required expenses. Re-adoption expenses related to the intercountry adoption of a child also qualify. Generally, the only adoption-related expenses that do not qualify are birth mother expenses.

An expense may be a qualified adoption expense even if the expense is paid before an eligible child has been identified. For example, prospective adoptive parents who pay for a home study at the outset of an adoption effort may treat the fees as qualified adoption expenses.

5. Does Everyone Get the Full Amount? What is the income eligibility criteria for the adoption tax credit?

Most adopting parents will qualify for the full Adoption Tax Credit. However, there are income restrictions. In 2023, families with a modified adjusted gross income below $239,230 can claim full credit. Those with incomes from $239,230 to $279,230 can claim partial credit, and those with incomes above $279,230 cannot claim the credit.

Employer-provided adoption benefits can also affect the amount of tax credit available. The amount paid by the employer needs to be deducted from the total adoption cost first. The remaining balance will be the maximum tax credit that can be claimed.

6. What About Adopting My Spouse’s or Domestic Partner’s Child?

While the adoption tax credit does not apply to expenses incurred to adopt the child of the taxpayer’s spouse. Unmarried domestic partners who live in states that allow co-parents or same-sex second parents to adopt their partner’s child may qualify for the credit.

To learn more about the Adoption Tax Credit visit the IRS website at https://www.irs.gov/taxtopics/tc607.

To file for the Adoption Tax Credit, complete Form 8839.pdf, Qualified Adoption Expenses, using Form 8839 Instructions.

To learn more about covering the cost of adoption, watch the “Making Adoption Affordable – Ways to Pay for Adoption” Facebook Live recording with Adoption Attorney E. Parker Herring.

Starting Your Adoption Journey? If you, or someone you know, is considering adoption and would like to learn more, call A Child’s Hope at 919-839-8800. Watch our placement day videos to hear adoptive parents share their adoption stories.

Pregnant? If you are a birth mother and are looking to place your child in a loving home, contact our Pregnancy Hotline to speak with a counselor: call or text (919) 971-4396 

Questions about the legal process of adoption in North Carolina, visit parkerherringlawgroup.com.

The information contained in this article is for general knowledge purposes only and not official tax advice. Individuals interested in claiming any tax credit should consult a qualified tax professional to determine specific eligibility and amounts.

About E. Parker Herring: An attorney and mother of three children, Parker has a deep respect and understanding of family law and the adoption process (for which she’s adopted two children of her own). She is the founder and director of A Child’s Hope, a North Carolina licensed adoption agency located in Raleigh that focuses on helping birth mothers and families looking to adopt. A Child’s Hope has placed nearly 450 children since 2000 and is the only North Carolina domestic adoption agency directed by an attorney. 

By E. Parker Herring

The most common concerns I hear from birth mothers regarding adoption are concerns about the child feeling abandonment or resentment toward their birth mother, and also whether adoptive parents have the capacity to love adopted children as much as they would a biological child. These seem like logical questions at first, unless you’ve worked with adoptive families for years. The length that these families go through to adopt — the expense, the work, and the time that these families invest in the process — is reflective of a very strong desire for a family.  And the absolute joy in their hearts when they are matched with a child is nothing short of extraordinary. These children are the most wanted, adored, and loved on the planet!

As open adoptions have become the norm for our agency, we encourage birth mothers to communicate with the child over the years. The best way for you to assure that your child knows that you love him is to give the adoptive parents something – a letter or a life book – that will show your love and express how you feel. Then continue to follow up over the years, and the child will be assured that you never forgot them, and only want the best for them.

The U.S. Department of Health and Services has posted the latest adoption statistics taken from the 2007 National Survey of Adoptive Parents (NSAP). This is the first empirical study with quantifiable evidence that can be used to combat common misconceptions that prospective birth parents and adoptive families have about adoption. These adoption statistics prove many of the more widespread misconceptions to be false.

General Adoption Misconceptions vs. Adoption Statistics

Misconception: “Will the adopted child be loved as much as a biological child?”

This is a very natural feeling that both the adoptive family and birth parents share before entering into an adoption. Any fears of the adoptive family not loving a child simply because it doesn’t have their genes are immediately eliminated as soon as the adoptive parents first lay eyes on their baby. This is true in nearly every single adoption.

Look no further than how the adoptive parents interact with the adopted child: Nearly 3 out of every 4 adopted children ages 0-5 are read to or sang to every day, compared with only half of non-adopted children who receive the same attention from their biological parents. Furthermore, well over half of all adopted children eat dinner with their families at least six days per week. 

It’s no surprise that the adoption statistics show how much adoptive parents cherish the time they have with their children. They appreciate every day the opportunity to be a mom and a dad, and it shows.

They are the first ones at their son’s soccer practice, and they are in the front row of their daughter’s play. Their lives quite literally revolve around their children.

At first glance, the statistic about the majority of adopted children being read to every day may not seem like much, but looking further into the stat gives a glimpse into what adoptive parents are all about. Couples who struggle with infertility gain an astounding appreciation for the gift of parenthood. Adoption presents the couple with another chance to reclaim their dreams of raising a child, and it shows in the little things, such as reading to him or her before bed.

Another national adoption statistic says that 9 out of every 10 adoptive couples said the relationship they share with their adopted child is “very close,” and nearly half said that their relationship is even “better than expected.” Also, more than 9 out of every 10 people said they would “definitely” make the same decision to adopt again.

These statistics are remarkable considering all of the special needs babies that are adopted and the other complexities that may occur through adoption. These statistics proves that no matter how difficult the adoption process can be emotionally, the end result is what matters and that the family unequivocally loves the child.

Birth Mother Misconceptions vs. Adoption Statistics

Misconception: “My child will hate me because I placed her for adoption.”

This feeling is a consequence of people and media that are inexperienced in adoption. An extended family member or a friend who may not agree with the pregnant woman’s desire to place her child for adoption may say that the child will hate her if she goes through with it. Similarly, some television shows and movies have unjustly portrayed adoptees in this way as well.

The adoption statistic shows that over 90 percent of adopted children ages 5 and older have positive feelings about their adoption. Most adopted children are raised in happy homes by loving adoptive parents, so why would an adopted child hate his birth parents, the ones who provided him with a great life and his mom and dad?

Recently we posted a blog by a woman who shared her journey as an adopted child, speaking of the love that she felt for her adoptive mother, who she knew only as “Mom.” It’s a beautiful testament to the bond between mother and child that has little to do with biology, and everything to do with love.

For more, read about how Scott and Jennifer feel about their birth parents.

Birth mothers who are considering placing their child for adoption, are encouraged to contact A Child’s Hope on our 24-hour hotline at 877-890-4673 or text “pregnant” to 919-971-4396. Our compassionate counselors can listen and provide the information you need to make the best decision for you and your child.