Tax Credit and Exclusion Information for Adoptive Families I KingSpry

Tax Credit and Exclusion Information for Adoptive Families

Photo of attorney Rebecca A. Young

Posted on March 7th, 2018
by Rebecca A. Young

Adoption tax credit

The adoption tax credit is available if you adopted any child other than a stepchild, including adoption of a relative’s child, international and domestic adoptions, and adoption from foster care. In addition, if you were adopting from the United States, you can claim the credit for qualified expenses for a failed or non-finalized adoption the year after the expenses are incurred. For 2017 the maximum credit is $13,570.00.

The adoption tax credit is intended to offset adoption-related expenses to enable more families to afford an adoption. The credit is a maximum amount, and is compared to the total of the qualified expenses actually incurred. Qualified adoption expenses include home studies, attorney fees, court costs and travel expenses. Surrogacy costs and costs that are reimbursed from an employer or other organization are not qualified adoption expenses. If the adopted child is deemed to have special needs (most often, this will apply to an adoption from foster care although not every child adopted from foster care is considered special needs), the parent can claim the entire credit regardless of the expenses incurred.

The credit is deducted from the parent’s tax obligation and is phased out based on the adopting parent’s income. For 2017, the full credit is available for adopting parents whose modified adjusted gross income is less than $243,540.00. Those who earn between $203,541.00 and $243,539.00 in income are eligible for a reduced credit. If the parent’s tax liability is less than the credit, the remaining amount may be carried over for up to five years.

Tax Exclusion

Adoptive parents whose employers offer an approved adoption assistance program can exclude any expenses reimbursed to them through the program from their taxable income. However, parents cannot claim the same expenses for the tax credit and the tax exclusion. So for example if a family had $15,000.00 in qualified adoption expenses and the employer reimbursed $10,000.00 through an approved adoption assistance plan, then: (1) the family can exclude the $10,000.00 from taxable income; and (2) apply $3,570.00 for the adoption tax credit. Note that the maximum tax benefit is capped at $13,570.00.

Adoptive parents should maintain documentation of their qualified adoption expenses and provide them to their tax preparer to ensure proper credit is applied.


heARTbeat is a publication of KingSpry’s Adoption Law and Assisted Reproductive Technology Law Practice Group. It is meant to be informational and does not constitute legal advice.