Adoption Credit

The Adoption Tax Credit offers financial relief to families navigating the adoption process. For the 2025 tax year, the maximum credit is $17,280 per eligible child, up from $16,810 in 2024.

What Is the Adoption Tax Credit?

This non-refundable credit helps offset qualified adoption expenses, such as:

• Adoption fees

• Court and legal costs

• Travel expenses, including meals and lodging

• Other necessary expenses directly related to the legal adoption of an eligible child

While the credit reduces your tax liability, it won’t result in a refund if the credit exceeds your tax owed (this is why it’s considered a nonrefundable credit). However, any unused credit can be carried forward for up to five years.

Who Qualifies?

To be eligible:

• The adopted child must be under 18 or physically/mentally incapable of self-care.

• You cannot claim the credit for adopting your spouse’s child.

• For 2025, the credit phases out for taxpayers with a modified adjusted gross income (MAGI) over $259,190 and is eliminated at $299,190 .

Special rules apply to children with special needs. If a U.S. state determines that a child cannot or should not be returned to their parents’ home and is unlikely to be adopted without assistance, you may claim the full credit regardless of actual expenses incurred.

When to Claim the Credit

• Domestic Adoptions: Claim expenses in the year they are paid, even if the adoption isn’t finalized.

• Foreign Adoptions: Claim expenses in the year the adoption becomes final.

• Special Needs Adoptions: Claim the full credit in the year the adoption is finalized, regardless of expenses paid .

How to Claim the Credit

1. Fill out IRS Form 8839, Qualified Adoption Expenses.

2. Attach/Include Form 8839 with your federal tax return.

3. Include the child’s name, year of birth, and identifying number (Social Security number, Adoption Taxpayer Identification Number, or Individual Taxpayer Identification Number).

4. Keep all documentation related to the adoption and expenses for your records .

Final Thoughts

The Adoption Tax Credit can significantly reduce the financial burden of adoption. Ensure you understand the eligibility criteria, maintain thorough records, and consult with a tax professional if needed to maximize your benefits.

I hope this information is helpful and congratulations if you are going down the path to adoption.

If we can be of further assistance, we do offer virtual advisory sessions that can be scheduled online here:

https://www.caslerfinancial.com/scheduling