Blog// LGBT Adoptive Parents

Guide to Claiming Your Adoption Tax Credit

The federal adoption tax credit for 2020 is a credit that adoptive parents may file for last year, based on the relevant out of pocket expense they incurred as well as specific income qualifications. The maximum credit amount is $14,300 and applies to any adoption circumstance. These include private domestic adoptions, international adoptions and those that were handled through public foster care. 

Are You Eligible?

Eligibility for this tax credit includes several conditions. First, parents must have adopted a child that is not their stepchild. Next, the household income must fall within a certain set of guidelines. 


For 2020, a family with a modified gross income that falls below $214,520 can claim the full credit amount. As income amounts increase, parents will be eligible for a partial credit amount. Those who have household incomes that exceed $254,520 will not be able to file for the credit. An exception to this formula is in the instance that a family adopts a special needs child. This circumstance allows for the adoptive parents to receive the full credit, regardless of expenses. 


How to Claim

Claiming the 2020 adoption tax credit can be done by completing the most recent version of IRS Form 8839. It should then be submitted with a Form 1040 when filing taxes. Special attention should be given to the form and individuals should check closely to make sure that they qualify and apply for the credit accurately. Most computer software programs that are designed to help people file their own taxes will be able to create the 8839 form. 


However, if there are any questions or concerns, an experienced tax preparer should be used. This will prevent any errors as well as making sure that families receive the maximum credit that they are entitled to. 


The tax credit is nonrefundable. It is beneficial in the fact that it can erase some of the tax liability that you may owe to the IRS. However, adoptive parents will not receive the leftover balance as a refund. A positive is that the balance can be carried on for up to five years, so it can be applied to liabilities in the future. This also makes it very important for families to file for the credit, even if they do not have any current tax liability. The credit will be available for use in the upcoming years if a federal tax obligation should develop. 


Qualified adoption expenses are those that were paid in relation to the adoption. Any amount that was paid for or reimbursed by a government agency, employer or other organizations must be subtracted from those expenses before filing for the credit. In some cases, even expenses incurred during a failed adoption may be deemed eligible if a successful adoption followed. A professional who is well versed in this category will be able to help adoptive parents work through their expenses to see what will qualify. The Form 8839 from the IRS also utilizes a user-friendly format that can help individuals walk through the specifics of the process as well.


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