Article Table of Contents
Adoption Tax Credit Amounts
The adoption tax credit is adjusted for inflation, so it increases periodically. The credit amount is for each eligible child, and they' are provided in the list below year by year:
- 2019: $14,080, non-refundable
- 2018: $13,810, non-refundable
- 2017: $13,570, non-refundable
- 2016: $13,460, non-refundable
- 2015: $13,400, non-refundable
- 2014: $13,190, non-refundable
- 2013: $12,970, non-refundable
- 2012: $12,650, non-refundable
- 2011: $13,360, refundable
- 2010: $13,170, refundable
- 2009: $12,150, non-refundable
- 2008: $11,650, non-refundable
- 2007: $11,390, non-refundable
- 2006: $10,960, non-refundable
You will not be eligible for the full $14,080 credit in 2019 if you had only $10,000 in qualifying expenses because your credit is limited to the amount of your expenses. Otherwise, you will be restricted to a credit of $14,080 even if you have incurred $20,000 on qualified expenses, subject to certain income phaseouts, and with one exception. You are entitled to claim the full amount of the adoption credit if you have adopted a special needs child, even if your out-of-pocket expenses are less than the tax credit amount.
The credit is non-refundable, so it will erase any tax liability you owed to the IRS, but you won't receive direct compensation if the credit is more than this amount. However for example, if you owe $10,000 to the IRS but qualify for the full $14,080 tax credit, you will still only receive credit for $10,000. Any excess credit can be carried forward for up to five years, so the remaining $4,080 can still be claimed in later years.
Phaseout Ranges
The adoption tax credit phaseout ranges depend on modified adjusted gross income (MAGI), which numerous taxpayers find it to be the same as their adjusted gross incomes (AGI). Your MAGI is your AGI with a few add-backs, such as any tax-exempt interest you would not have included in your taxable income when you prepared your return.1
Additionally, any income excluded from tax using the foreign earned income exclusion must be added back to work out the phaseout range for the adoption credit. The IRS provides a worksheet for working out the modified adjusted gross income for the adoption credit in the instructions for Form 8839. The figures as given below are also adjusted periodically to keep pace with the economy.2
- 2019: $211,160–$251,160
- 2018: $207,140–$247,140
- 2017: $203,540–$243,540
- 2016: $201,920–$241,920
- 2015: $201,010–$241,010
- 2014: $197,880–$237,880
- 2013: $194,580–$234,580
- 2012: $189,710–$229,710
- 2011: $185,210–$225,210
- 2010: $182,520–$222,520
- 2009: $182,180–$222,180
- 2008: $174,730–$214,730
- 2007: $170,820–$210,820
- 2006: $164,410–$204,410
You cannot claim the adoption credit if your MAGI exceeds the top phaseout figure, and your credit begins reducing in value at the first threshold. For example, you can only claim a part of the credit if your MAGI fell between $211,160 and $251,160 in 2019, and the more you earn, the less of a portion you can claim. IRS Form 8839 takes you through the calculations if your MAGI is more than the lower threshold.
Other Eligibility Requirements
You must adopt an eligible child and pay the qualified adoption expenses out of your own pocket to claim the adoption credit. Eligible children include any child age 17 or younger, or a child of any age who is a U.S. citizen or a resident alien and physically or mentally challenged of caring for themselves.
Qualified adoption expenditure are calculated by summing all the necessary expenses related to the adoption, then subtracting any amounts reimbursed or paid for by your employer, a government agency, or any another organization. Expenditure for a failed adoption might qualify for the credit if a successful adoption follows , but both the adoption efforts would be considered as one adoption and subject to the dollar limit per eligible child.
Special Needs Children
For purposes of the adoption credit, special needs children are those who get adoption assistance or adoption subsidy benefits, all the more because they are in foster care. Benefits can include Medicaid or reimbursement of certain expenses and are received because the state considers that the child would not be adoptable if they weren't paid. The state must also decide that the child cannot be returned to the parents.
The child may or may not have a physical, emotional, or mental challenge , but a disability alone will not qualify a child as special needs without these other factors being present, nor does it being in foster care automatically qualify a child as special needs.
When to Claim the Adoption Credit
You may claim the adoption credit in the year after your expenses were paid if they were paid before the adoption was final, and you may take it in the same year for the expenses that were paid that year if the adoption was final in that year. For expenses paid in the year after the adoption is final, you may take the adoption credit in the year the expenses were paid.
Some different rules may apply if the child is a foreign national, however. In this case, you may take the adoption credit only in the year when the adoption becomes final, or you can take the credit for expenses in the year when you paid them , if they were paid in the year after the adoption was finalized. You will have to apply for an Adoption Taxpayer Identification Number (ATIN) to start claiming your adopted child as a dependent if the child doesn't yet have a Social Security number. The IRS provides us with comprehensive information about the ATIN on its website.
