IRS Tax Breaks for Adoptions: What You Need to Know

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published 29 October 2024

Growing your family through adoption can be a wonderful experience, but it sometimes can be costly. However, there’s a federal tax break that might help.

The adoption tax credit is a nonrefundable tax credit designed to provide relief for the qualified costs related to the adoption of a child.

The credit is adjusted for inflation and increased for 2024. Additionally, the IRS just announced an upward inflation adjustment for the adoption tax credit, and other key family tax breaks for 2025 (tax returns you'll file in early 2026).

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The credit is available for each child adopted, whether via public foster care, domestic private adoption, or international adoption. Because it’s a nonrefundable credit, if you don’t use the entire credit amount, you can carry the unused portion forward for up to five years.

If you’re interested in adopting or have adopted a child and believe you may qualify for the credit, here’s what you need to know.

What are the 2024 adoption tax credit amounts?

As mentioned, the adoption tax credit is designed to help families offset the costs of adoption whether domestic, private, through foster care, or foreign.

As a nonrefundable tax break, the credit can reduce your tax liability to zero. However, you won’t get a refund if the expenses you incurred are lower than the maximum credit amount.

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

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

For 2024, families with a modified adjusted gross income (MAGI) of under $252,150 will receive the full credit.
The tax credit phases out entirely if your income exceeds $292,150.

Who is eligible for the adoption credit?

To qualify for the maximum amount of the adoption tax credit, you’ll have to make under $252,150 for the 2024 tax year. The tax benefit also covers costs related to the adoption as long as the child meets the following criteria:

The child is under 18. If the child turns 18 during the year of the adoption, the child is eligible for part of the year they were under 18 years of age.
The child is disabled or physically or mentally unable to take care of themself.
The state welfare agency determines a child has special needs. (More on that below).

Adopting a child with special needs

A special needs adoption refers to children whose risk factors often make them more difficult to place, according to the state’s child welfare agency.

For this tax credit, a special needs child does not refer to children with disabilities.

When it comes 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 the child can’t or shouldn’t be returned to their parent’s home
The state determines the child wouldn't be adoptable without financial assistance

There’s one exception: the federal tax credit is not available for foreign children with ‘special needs’ who are adopted.

What are qualified adoption expenses?

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

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

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

You can also expense traveling costs — including the amount spent on meals and lodging away from home — that are directly related to the adoption process.

What isn’t a qualified adoption expense

There are just six expenses that can’t be claimed under the adoption tax credit. The tax break does not cover:

The adoption of stepchildren
Paying fees or expenses related to surrogate parenting
Expenses that have been reimbursed by your employer or otherwise

Additionally, the adoption credit doesn't cover expenses allowed as a credit or deduction under another federal tax code provision. In other words, if you have received funds under any state, local, or federal program.

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

Adoption doesn’t have to be expensive

There are some misconceptions when it comes to expenses associated with the adoption process, and it can be daunting to some families.

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

So, before starting your adoption journey, look at your state’s available programs or speak with a trusted agency to find out if assistance services are available.

Gabriella Cruz-Martínez is a seasoned finance journalist with 8 years of experience covering consumer debt, economic policy, and tax. Before joining Kiplinger as a tax writer, her in-depth reporting and analysis were featured in Yahoo Finance. She contributed to national dialogues on fiscal responsibility, market trends and economic reforms involving family tax credits, housing accessibility, banking regulations, student loan debt, and inflation.

Gabriella’s work has also appeared in Money Magazine, The Hyde Park Herald, and the Journal Gazette & Times-Courier. As a reporter and journalist, she enjoys writing stories that empower people from diverse backgrounds about their finances no matter their stage in life.