IRS Tax Credits for Adoptions: What You Need to Know

Growing a family through adoption can be a wonderful experience, but sometimes it can be expensive. However, there is a federal tax credit that can help.

The Adoption Tax Credit is a non-refundable tax credit designed to help offset qualified expenses related to the adoption of a child.

The loan is adjusted for inflation and extended until 2024. In addition, the IRS just announced upward inflation adjustments for the adoption tax credit and other key family tax benefits for 2025 (tax returns you file in early 2026).

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The credit is available for every child adopted through public foster care, domestic private adoption or intercountry adoption. Because it is a non-refundable loanif you do not use the entire amount of the loan, you can transfer the unused part for a period of up to five years.

If you’re interested in adopting or have already adopted a child and think you might qualify for a loan, here’s what you need to know.

What are the adoption tax credit amounts in 2024?

As already mentioned, the Adoption Tax Credit is designed to help families offset the costs of adopting at home, privately, through foster care or abroad.

As a non-refundable tax benefit, the credit can reduce your tax liability to zero. However, you will not be reimbursed if your expenses are less than the maximum loan amount.

For the 2024 tax year (tax returns are usually filed in early 2025), the maximum adoption credit is $16,810 — that’s more than $15,950 in 2023.
In 2025 (you’ll file in early 2026), that amount will increase to $17,280.

The amount you receive will also depend on your threshold income, which is indexed for inflation:

Who is eligible for an adoption loan?

To qualify for the maximum adoption tax credit, you must earn less than $252,150 for the 2024 tax year. The tax credit also covers adoption costs if the child meets the following criteria:

The child is under 18 years old. If the child turns 18 in the year of adoption, the child is entitled to the part of the year when he was under 18.
The child is disabled or physically or mentally unable to care for himself.
The State Social Security Service determines whether a child has special needs. (More on this below).

Adoption of a child with special needs

According to the state agency for children, adoption concerns children whose placement is often difficult due to risk factors.

For this tax credit, a child with special needs does not count as a child with a disability.

With regard to the adoption tax credit, a child has special needs if:

The child is a citizen or resident of the United States or territories at the time of adoption
The state determines that the child cannot or should not be returned to the parental home
The state believes that a child cannot be adopted without financial assistance

There is one exception: the federal tax credit is not available to foreign “special needs” children who are adopted.

What are qualified adoption expenses?

The adoption tax credit can also help you defray certain adoption costs, but you’ll have to fill out the IRS Form 8839. The form will allow you to determine the amount of the adoption credit and any employer-provided benefits that you can exclude from your income.

Some qualified adoption expenses include, but are not limited to:

Legal fees paid to your lawyer and related court costs
Fees you paid to the adoption agency
Re-adoption costs related to the adoption of a foreign child

You can also add travel expenses, including the amount spent on food and accommodation outside the home, which are directly related to the adoption process.

What are not qualified adoption expenses

There are only six expenses that cannot be claimed under the adoption tax credit. The tax benefit does not apply to:

Adoption of stepsons
Payment of fees or costs related to surrogacy
Expenses that have been reimbursed by your employer or otherwise

In addition, the adoption credit does not cover expenses allowed as a credit or deduction under another provision of the federal tax code. In other words, if you received funds from any state, local, or federal program.

Finally, you cannot claim adoption expenses that violate state or federal law.

Adoption does not have to be expensive

There are some misconceptions about the costs associated with the adoption process, and this can be intimidating for some families.

In addition to the federal adoption tax credit, some states offer programs to help children who are adopted through the foster care system, such as monthly cash payments, adoption reimbursements, and medical assistance.

So, before you start adopting, check your state’s available programs or contact a vetted agency to see if assistance services are available.