The Adoption Tax Credit Guide

By Creating a Family

April 2, 2023

6m read

This content was originally published by Creating a Family, the national adoption and foster care education and support nonprofit.

To view the original article published by Creating a Family, please visit Adoption Tax Credit Guide 2022.

The Adoption Tax Credit 2022

It is very important that families understand that the Adoption Tax Credit can be an essential part of helping them adopt, whether they are adopting through the foster care system, domestically or internationally. Adoption is rapidly changing — international adoptions have declined significantly, and the number of children in foster care is around 390,000. The one thing that has remained constant is the need for families adopting or thinking about adopting to understand the financial resources available, especially the federal Adoption Tax Credit.

An adoptive family can apply the Adoption Tax Credit toward their federal tax liability when they file their tax return. This means the applied credit can reduce what they owe in federal income taxes for the year. It is not a refundable tax credit; however, it is still alive, permanent, and a great credit at $14,890 per child.

Please note: the Adoption Tax Credit will not cover self-employment tax, early pension distribution penalty, or first-time homebuyer payback.

Who qualifies for the Adoption Tax Credit 2022?

You qualify for the Adoption Tax Credit if you adopted a child (except your spouse’s child) and paid out-of-pocket expenses relating to the adoption. The amount of the tax credit you qualify for is directly related to how much you spent on adoption-related expenses. Income can also be excluded as taxable through an employer-provided adoption benefits program. Both a credit and an exclusion may be claimed for the same adoption; however, both cannot be claimed for the same expenses.

What Expenses are Covered Under the Adoption Tax Credit?

Qualified Adoption Expenses are allowed under the Adoption Tax Credit and include any expenses necessary for the adoption.

Examples of qualified expenses are court fees, home study, lawyer fees, medical examinations/physicals, travel expenses (meals, lodging, airline, gas), agency fees, dossier fees, and any other fees that are directly related to the adoption.

The most asked question is whether the living expenses of the expectant mom paid by the prospective adoptive parents in domestic infant adoptions are qualified adoption expenses under the Adoption Tax Credit. They are not.

A good rule of thumb when determining what adoption expenses to include for the Adoption Tax Credit is to use those expenses you know are covered. Most adoptions, other than from foster care, will exceed the amount of the credit, so choose the expenses that are clearly considered “qualified adoption expenses.”

When Can I Apply for the Adoption Tax Credit?

International and foster care adoptions must be finalized before you can apply for the Adoption Tax Credit. Expenses for domestic adoptions that are not yet final can be taken the year after the expenses are paid, or you can wait until the adoption is final.

How Does the Adoption Tax Credit 2022 Work?

Line 47 of your Federal 1040 shows your tax liability. The difference between your tax liability and your federal withholding is either what you get as a refund or what you owe the federal government when you do your tax return.

The Adoption Tax Credit comes in on Line 55 (Other Credits) from Form 8839 and takes care of your tax liability up to $14,890 per child for 2022. You will get your withholding back (if the tax liability is less than the maximum credit amount), and the child tax credit drops down to an additional child tax credit (if you qualify).

If you do not use all the credit in the first year, you can carry it forward for up to 5 years.

What Documentation Do I Need to Keep for the IRS for the Adoption Tax Credit?
  • Final Judgment of Adoption (all adoptions)
  • Adoption Assistance Eligibility Determination (Subsidy Agreement) that declares the child’s special needs, if claiming credit for a child declared special needs by your state through foster care (foster adoptions)
  • A home study/placement agreement completed by an authorized placement agency (all adoptions except foster)
  • All documentation of paid qualified expenses (all adoptions except foster)
  • All documents must be signed and dated (all adoptions). The IRS will not accept any Home study/Placement agreement, Judgment of Adoption, or Subsidy agreement/Eligibility agreement without it being signed and dated by the proper authorities.

Looking for More Detailed Info about the Adoption Tax Credit?

If this guide has not answered all of your questions, please check out Creating a Family's training course, Adoption Tax Credit 2022. This course (and many others!) is free with your PairTree subscription!

Here is what you’ll learn in the Creating a Family Adoption Tax Credit 2022 online course:
  • What is a Qualified Adoption Expense for purposes of the Adoption Tax Credit 2022?
  • When can you claim the Adoption Tax Credit? (Domestic private adoption, International Adoption, Re-adoption in the US for international adoption, and Foster Care Adoption)
  • How does the Adoption Tax Credit work with kinship adoptions? What if the child never was involved with foster care?
  • Special Needs Adoption: How does the Adoption Tax Credit differ for adoptions from foster care? What does the IRS accept as proof of “special needs”?
  • Can you reclaim your expenses for an attempted adoption that did not result in a placement? How?
  • What income level (Modified Adjusted Gross Income) is excluded from claiming the Adoption Tax Credit in 2022?
  • Can you amend the previous year’s tax return to claim the adoption tax credit? Is the adoption tax credit something you can amend, and if so, how do you amend it, and how many years back?
  • Will the Adoption Tax Credit offset self-employment tax?
  • How does the Secure Act impact claims for the Adoption Tax Credit for 2022 taxes?
  • What should you do if the child’s Social Security Number is unavailable when you file?
  • Should you use an Adoption Taxpayer Identification Number (ATIN #) if you don’t have the child’s social security number?
  • How does the Adoption Tax Credit work in conjunction with employee adoption benefits?
  • How do you find a tax specialist knowledgeable on the Adoption Tax Credit?
  • Where should you go to learn more about the Adoption Tax Credit, its history, and how to advocate for it?

To learn more, visit Creating a Family.

Creating a Family Creating a Family is the national adoption and foster care education and support non-profit.