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Can you claim the adoption tax credit?

On Behalf of | Apr 1, 2018 | Divorce

Expanding your family through adoption is a beautiful thing. Bringing a new child who needs a family into your life is a noble pursuit. However, it can also be complex and expensive. Adoptions can cost tens of thousands of dollars.

Whether you complete a domestic or international adoption, you may wonder how this will impact your taxes. Thankfully, you may be able to claim an adoption tax credit. Here is some important information you should know about claiming this credit.

Eligible children

According to CNN, the IRS allows adoptive parents to claim a maximum of $13,570 for each eligible child. This can give you some significant financial relief. Your child is eligible if he or she is under 18 years old or an adult who is mentally or physically unable to care for him- or herself. 

Expenses and reimbursement

You may be able to receive reimbursement for any necessary or reasonable costs of legal adoption, including the following:

  • Home studies
  • Attorney fees
  • Court costs
  • Traveling expenses

One important piece of information is that this credit is nonrefundable. This means claiming the credit will only lower your tax liability and will not create any tax refund. However, you may be able to carry the credit forward for up to five years if you do not use the entire amount the first year.

Not all parents qualify

Whether you qualify for the credit depends on more than whether your adoptive child is eligible. For example, you may face limitations if any of these conditions apply to your situation:

  • You spend less than the ceiling amount
  • Your state agency or employer reimbursed your adoption expenses
  • Your modified adjusted gross income is over $203,540

In fact, your ability to claim the credit completely goes away if your modified adjusted gross income reached $243,540 or more.

If you need help figuring out the tax implications of your adoption, you should speak with an attorney. 


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