Kara Sears
The Adoption Tax Credit (ATC) is a tax benefit that can help offset the costs of adoption, which can be very expensive. The ATC was introduced in 1997 following the passage of the Small Business and Job Protection Act of 1996, with a maximum credit of $5,000 for qualifying families. Since then, the credit limit has increased and changed over time, with the maximum credit per child for tax year 2024 being $16,810. The ATC is a non-refundable credit, meaning that taxpayers cannot receive a refund for the amount of the credit that exceeds their tax liability. To claim the ATC, taxpayers must complete Form 8839, Qualified Adoption Expenses, and meet certain eligibility requirements.
| Characteristics | Values |
|---|---|
| Maximum credit for 2024 | $16,810 per child |
| Maximum credit for 2025 | $17,280 per child |
| Maximum credit for 2023 | $15,950 per child |
| Income eligibility criteria for 2024 | Families with a modified adjusted gross income below $252,150 can claim full credit |
| Those with incomes from $252,151 to $292,150 can claim partial credit | |
| Those with incomes above $292,150 cannot claim the credit | |
| Credit type | Non-refundable |
| Credit applicability | Domestic, international, private, and public foster care adoption |
| Qualifying expenses | Court costs and legal fees, adoption-related travel expenses, agency fees, attorney fees, dossier, meals, and lodging |
| Expenses related to adopting spouse's child do not qualify | |
| Expenses related to adopting a child with special needs qualify |
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What You'll Learn
Income eligibility criteria
The Adoption Tax Credit (ATC) was introduced following the passage of the Small Business and Job Protection Act of 1996. It is a fiscally responsible way to help American families who want to provide a permanent, loving home to children in the U.S. and worldwide. The credit amount applies to each adoption of a child and not each calendar year. This means that the amount of the credit is limited to the taxpayer's taxes due for that year. Any credit leftover from their owed taxes can be carried forward for up to five years.
The maximum credit per child for 2024 is $16,810, while for 2025, it is $17,280. The credit is non-refundable, meaning that you can't get back more than you owe in taxes. However, as of July 2025, the ATC is partially refundable, and eligible families can receive up to an additional $5,000.
In 2024, families with a modified adjusted gross income of $252,150 or less could claim the full credit. Those with incomes between $252,151 and $292,150 could claim partial credit, and the credit was unavailable for those with incomes above $292,150. For 2025, the income eligibility criteria are yet to be released.
The credit is available for domestic, international, and public foster care adoptions. However, it is not available for those adopting their spouse's child. Additionally, there are separate rules for adopting a child with special needs.
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Claiming expenses
For domestic adoptions within the United States, you can claim expenses each year as they are incurred, regardless of whether you have finalized the adoption or identified an eligible child. This means that you can claim expenses even before the adoption is legally complete. Domestic adoptions include private adoptions and public foster care adoptions. It's important to note that you must meet certain eligibility requirements to claim these deductions.
When it comes to foreign or international adoptions, the rules are a little different. In this case, you can claim expenses once the adoption is finalized. After the adoption is legally complete, you can claim all eligible expenses incurred, including those from previous years. This provision ensures that you can seek reimbursement for expenses related to adopting a foreign child.
Qualified Adoption Expenses
Not all expenses are considered qualified adoption expenses. These expenses typically include reasonable and necessary fees directly related to the legal adoption of an eligible child. Examples of qualified expenses include court costs, legal fees, agency fees, travel expenses (including meals and lodging), and other required expenses. It's important to note that expenses related to adopting your spouse's child generally do not qualify for these deductions.
Income Eligibility Criteria
The ability to claim expenses and the amount you can deduct are often dependent on your income level. For 2024, families with a modified adjusted gross income below $252,150 could claim the full credit. Those with incomes between $252,151 and $292,150 could claim a partial credit, and incomes above $292,150 were ineligible for the credit. These income limits may vary from year to year, so it's important to refer to the latest guidelines.
Maximum Credit Amounts
The maximum credit amounts for adoption expenses have increased over the years. For adoptions finalized in 2025, the maximum credit per adopted child is $17,280. For 2024, the maximum credit is $16,810 per child, and for 2023, it was $15,950 per child. It's important to note that the adoption tax credit is non-refundable, meaning you cannot receive a refund for any credit amount exceeding your tax liability. However, any leftover credit from your owed taxes can be carried forward for up to five years.
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Tax credit vs tax deduction
In the context of adoption tax benefits in the US, it is important to understand the difference between tax credits and tax deductions. Both credits and deductions can help lower your tax bill or increase your refund. However, they work in very different ways.
Tax credits directly reduce the amount of tax you owe, dollar for dollar. For example, a tax credit valued at $1,000 will lower your tax bill by the corresponding $1,000. Most tax credits are non-refundable, meaning they cannot reduce your tax liability below zero, and any leftover credit amount can be carried forward for up to five years. In the case of adoption, eligible expenses include reasonable and necessary adoption fees, court and legal fees, and adoption-related travel expenses.
On the other hand, tax deductions reduce how much of your income is subject to taxes. Deductions lower your taxable income by the percentage of your highest federal income tax bracket. So, if you fall into the 22% tax bracket, a $1,000 deduction saves you $220. There are two types of tax deduction strategies: taking the standard deduction or itemizing. The standard deduction is a one-size-fits-all reduction and does not require any documentation. Itemizing, on the other hand, allows you to take advantage of specific deductions such as home mortgage interest, medical expenses, or charitable donations.
To illustrate with an example, let's consider the Adoption Credit offered by the Internal Revenue Service (IRS). Eligible taxpayers who have started the adoption process can claim expenses for each adoption of a child, regardless of the calendar year. The maximum adoption credit for 2021 was $14,440 per eligible child, and there are income limits that affect the credit amount. This credit is non-refundable, meaning you can't get back more than you owe in taxes. Any unused credit amounts can be carried forward for up to five years. It's important to note that taxpayers who adopt their spouse's child cannot claim this credit.
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Adoption credit history
The adoption tax credit first became available to American taxpayers following the passage of the Small Business and Job Protection Act of 1996. The credit is designed to offset the costs and fees of the adoption process. The Patient Protection and Affordable Care Act increased the credit amount and made it refundable for the years 2010 and 2011. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extended the credit but ended the modifications made by the Affordable Care Act, including refundability.
The American Taxpayer Relief Act of 2012 made the adoption tax credit a permanent part of the tax code. Although the tax code changed significantly in 2018, the adoption tax credit was preserved. The maximum adoption credit amount that taxpayers could claim on their 2021 tax returns was $14,440 per eligible child. The credit applies to each adoption of a child and not each calendar year. This means that if expenses are claimed in more than one year for the same adoption effort, taxpayers must subtract past credit amounts from the remaining credit. The credit is non-refundable, meaning taxpayers can't get back more than they owe in taxes.
For 2024, the maximum amount of qualified adoption expenses that can be claimed is $16,810. The credit applies to international, domestic, private, or public foster care adoptions. Taxpayers who adopt their spouse's child cannot claim this credit. To be eligible for the credit, taxpayers must have a modified adjusted gross income of $252,150 or less in 2024. The credit is reduced for incomes between $252,151 and $292,150 and is unavailable if income exceeds $292,150. If married, taxpayers must file jointly to claim the credit. However, exceptions exist for married individuals filing separately, and past returns can be amended to change the filing status if needed.
Registered domestic partners in states that allow second-parent adoption may qualify for the credit. However, they cannot claim the credit for expenses related to adopting their spouse's child. A "qualified child" for the Adoption Credit must be younger than 18. If the adopted person is older, they must be unable to physically take care of themselves. Qualified expenses include reasonable and necessary adoption fees, court and legal fees, and adoption-related travel expenses such as meals and lodging.
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State tax benefits
Many states in the US offer adoption tax benefits in addition to the federal tax credit. These state tax benefits are for state residents and can be claimed when filing state tax returns. Notably, some states limit benefits to adoptions of children in foster care within the state. For example, Florida grants free college tuition to public institutions within the state of adoption.
Additionally, there are special considerations for adopting children with special needs. For instance, parents will need to provide documentation that their child has special needs, which can include an adoption assistance/adoption subsidy agreement or a letter from the state/county child welfare agency.
The adoption tax credit was first introduced in 1997 with a maximum credit of $5,000 for qualifying families, and it has since been expanded and extended. For the 2024 tax year, the maximum nonrefundable tax credit per child is $16,810, although this amount may be adjusted annually. It is important to note that the adoption tax credit is not refundable, meaning taxpayers cannot receive a refund for any credit amount exceeding their tax liability.
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Frequently asked questions
The Adoption Tax Credit (ATC) is a tax credit offered to adoptive parents to encourage adoption in the United States. It helps to offset the costs and fees of the adoption process.
For the 2024 tax year, the maximum non-refundable tax credit per child is 16,810 for qualified adoption expenses. This amount is limited to the taxpayer's taxes due for the year and cannot be refunded if it exceeds your tax liability.
Qualified adoption expenses include reasonable and necessary adoption fees, court costs, legal fees, and travel expenses directly related to the legal adoption of an eligible child.
