Since 2003, families who adopt a child from the U.S. with special needs from foster care can claim a federal adoption tax credit even if they had no adoption expenses. Children who receive adoption assistance/subsidy are considered children with special needs. Other adoptive families are also eligible for the credit, but must have (and be able to document, if requested by the IRS) qualified adoption expenses.
How much you will benefit from the credit depends on your income and federal income tax liability—which is the amount you are responsible for in federal income taxes. Those who have lower incomes may not be able to use the credit at all and those with moderate incomes often can’t use the whole amount.
For those with higher incomes, the credit phases out. For 2018, those with modified adjusted gross incomes above $247,140 cannot claim the credit. Those with incomes from $207,140 to $247,140 can claim a portion of the credit.
For adoptions finalized* in 2018, the adoption tax credit is up to $13,810 per child. The 2018 adoption tax credit is not a refundable credit, which means you only benefit from the credit if you have federal income tax liability (see below).*Please note that prospective adopters who have non-finalized US adoptions may be able to claim an adoption tax credit before their adoptions are finalized.
The credit is a one-time credit for each child, and the credit for 2018 adoptions should be claimed when you file taxes for 2018 (typically in early 2019).
To be eligible for the credit:
- You have adopted a child other than a stepchild
- And the child must be under 18 at the time of adoption (or be physically or mentally unable to take care of him or herself).
Explore resources from the North American American Council on Adoptable Children (NACAC) and others below for eligibility information pertaining to the year that your adoption was finalized.