You Can Claim an Adoption Tax Credit to Help Offset Expenses if You Adopted a Child in 2020
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You Can Claim an Adoption Tax Credit to Help Offset Expenses if You Adopted a Child in 2020

the Adoption Tax Credit covers up to $14,300 in qualifying adoption expenses for adoptions completed during the 2020 tax year

August 16, 2021

If you adopted a child in 2020, you probably had to spend quite a bit of money to do it. Adoption is both expensive and exhausting, but it's also very fulfilling for both the child and the rest of the child's new family. The Adoption Tax Credit exists to give new parents a tax credit of up to $14,300 for each qualifying adopted child, offsetting some of the costs involved in the adoption process.

Income Criteria for Claiming the Credit

The maximum amount that you can claim per eligible child is $14,300, but you can only claim your actual expenses. Your income affects how much you can claim. If your modified adjusted gross income is between $214,520 to $254,520, the maximum amount of the credit will be reduced. You will not be able to receive the credit if your income is more than $254,520.

The only expenses that you can claim toward the credit are those directly related to legally adopting a child, such as court costs, attorney's fees, traveling expenses and traveling expenses when away from home. These expenses must be reasonable and necessary to complete the adoption and cannot have been reimbursed.

Credit Limitations

Remember that the Adoption Credit can only be applied once per qualifying child under 18 years old and applies only for the tax year in which you went through the adoption process and experienced the related expenses. It cannot be claimed for any year after the adoption because the child is considered your dependent from that point onward.

The tax credit is also not refundable, which means that you can only claim the credit if you have a federal income tax liability.

Claiming the Credit for Special Needs

If the child you adopted meets the federal government's definition of a child with "special needs," you are allowed to claim the maximum amount of the credit regardless of what you spent during the adoption process. Just because a child is disabled does not mean that he or she will qualify. In this instance, the child has to meet all the following requirements:

  • Must be a citizen or resident of the U.S.
  • Must not or cannot be returned to the home of the birth parents
  • Would likely never have been adopted without some form of financial assistance

Claiming the Credit for an Unsuccessful Adoption

Unfortunately, there are times when adoptive parents are unsuccessful in adopting a child. If this applies to you, you can claim the expenses incurred during the process up to the maximum amount.

Filing a Return for the Adoption Credit

Although most people now file their returns electronically, adoptive parents planning to claim the Adoption Tax Credit still have to file a paper return with Internal Revenue Service (IRS) Form 8839. This is because you have to submit a formal adoption certificate that has been signed by a judge. If you file under special needs criteria, you will have to submit documentation issued by the state and/or county to that effect.