Adoption Tax Credit

child tax

Written by Jeff Dvorachek

January 3, 2020

I have met so many people who have adopted children. Which is a great thing, since there are so many children looking for good homes. But did know that the IRS will help offset some of those costs by giving people a tax credit?

How does the credit work?

For adoptions that were finalized in 2019, the parent can claim a credit of up to around $14,000 per child.

To be eligible, all the parent has to do is have adopted a child—other than their stepchild—that is under the age of 18. But, if that child is physically or mentally unable to take care of themselves, then there is no age limit. They also have to be within the income limit of under $210,000 to $250,000 for families, which is pretty high before it becomes phased out. So I think a lot of people would be qualified for this credit.

What expenses can be used for the credit?

It’s really everything that you can think of for your reasonable and necessary adoption fees, whether it be court fees, attorney fees, even traveling fees (including amounts spent for meals and lodging while away from home), and just other costs that are directly related to the adoption.

How is the credit calculated?

This is one of the easier credits to calculate because it is dollar-for-dollar based on the amount of the expenses. So if you spend $14,000, you will get the full $14,000 tax credit on your return. But if you adopt a child with special needs, you will get the full $14,000 credit even if you did not spend it all.

Is the credit refundable?

It is not. What most people may do is carry any unused credit for up to five years until the whole thing is gone. The timing of the credit really depends on a number of factors. Whether you take it in one year, two years, or the full five years, talk to a tax professional when you are planning or beginning the process.

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Jeff Dvorachek
I joined Hawkins Ash CPAs in 1998. I am the partner-in-charge of the Manitowoc, WI, office and tax director for the firm. I have thorough experience providing tax services to individuals, commercial businesses, nonprofit entities and estates and trusts. I also provide compilation and review services. I lead the Tax Committee and am a member of the Information Technology Advisory Committee.

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