Tax Benefits for Adoption

Families considering adoption face emotional and financial hurdles.  Fortunately, there are federal tax credits and income exclusions to ease the financial burden.


First, let’s look at the adoption credit.  For 2022, the maximum value of the credit is $14,890 per child adopted, and may be limited based on your income.  For 2022, if your income is over $223,410 but under $263,410, you would get a reduced credit amount.  Incomes over $263,410 receive nothing.  It is also important to note that the credit is non-refundable, meaning that if you do not have an income tax liability that the credit can reduce, then you do not get a refund of the credit.  You can, however, carry the unused credit forward five years.


Costs that qualify for the credit include; court costs, attorney fees, agency fees, travel expenses, and other expenses directly related to legal adoption.  Expenses for adopting the child of your spouse are not eligible.  Married taxpayers must file a joint return to claim the credit.


Next, is the income exclusion for adoption assistance provided by your employer.  Employer assistance can be excluded from income as long as you have paid qualified adoption expenses in excess of the assistance amount received, and meet the income limits above. The maximum exclusion is $14,890.


Better news is that if you have enough expenses during the year, you may be able to use both the income exclusion AND the credit to offset those expenses!

Honorine Campisi, CPA