adoption funding, adoptive parents, Special Needs Adoption

Adoption Tax Credit 2014


Its that time of year again and if you haven’t already filed your taxes you may want to remember that the Federal government wants to encourage adoptions and established the adoption tax credit.  This generous credit was due to expire in 2012 but the Adoption Tax credit was made permanent under the fiscal cliff tax deal enacted on January 1, 2013.  If you adopt a child, this credit can save you as much as $13,190 in taxes in 2014.

 Who Qualifies for the Credit

You qualify for the adoption tax credit if you incur out-of-pocket expenses to adopt a child under 18 years of age, or a child of any age who is physically or mentally disabled. The child can be a United States citizen or resident alien (a “U.S. child” in IRS parlance), or a nonresident alien.

 How Much Is the Credit?

For 2014, the maximum credit is $13,190 per child.

The credit applies to all reasonable and necessary adoption expenses, including:

  • court costs,
  • attorney fees,
  • traveling expenses (including meals and lodging while away from home),
  • and other expenses directly related to the legal adoption of an eligible child.
  • Expenses for a foreign adoption (where the child was not a U.S. citizen or resident at the time the adoption process began) qualify only if you actually adopt the child.

 You cannot claim the credit for:

  • expenses for adopting your spouse’s child
  • payments to a surrogate parent
  • payments that violate state or federal law,
  • payments that are reimbursed by your employer or any other organization, or
  • expenses you paid using funds you received from a federal, state, or local program.

Moreover, you may not get the full amount of the adoption credit if your modified adjusted gross income (MAGI) is more than $197,880 and the credit is completely phased out if your MAGI is more than $237,880.

Unless you adopt a child with special needs, the adoption tax credit is not refundable, meaning you only benefit from it if you owe federal income taxes. However, any unused credit amount can be carried forward to reduce your tax liability for the next five years until the credit is used up. For example, if your tax liability is $10,000 and your credit is $12,000 that tax year, the adoption credit would reduce your tax liability to zero for that tax year and you could carry carry the remaining $2,000 credit forward to deduct in any of the next five years.

 Adopting Children with Special Needs

If you adopt a child with special needs, you are entitled to claim the full amount of the adoption credit, even if your out-of-pocket expenses are less than the tax credit amount. For example, even if you incur no expenses to adopt a special needs child, you are still entitled to the full credit.

A child is considered special-needs if:

  • the child is a United States citizen or resident
  • a state determines that the child cannot or should not be returned to his or her parent’s home, and
  • a state determines that the child probably will not be adopted unless assistance is provided.

The adoption credit is calculated on Form 8839 Qualified Adoption Expenses


No Rendering of Advice
The information contained within this blog article is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant.

Presentation of the information via the Internet is not intended to create, and receipt does not constitute, an accountant-client relationship. Online readers are advised not to act upon this information without seeking the service of a professional accountant.

Any U.S. federal tax advice contained in this website is not intended to be used for the purpose of avoiding penalties under U.S. federal tax law.

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2 thoughts on “Adoption Tax Credit 2014”

  1. ALERT – BREAKING NEWS: Last Wednesday, February 26, Chairman Camp of the Ways and Means Committee released his much anticipated tax reform proposal and it eliminates the adoption tax credit. This breaking news makes our advocacy efforts that much more critical. Now that an actual legislative proposal has suggested eliminating the credit altogether, we need to ensure that every single Member of Congress hears from us about its importance. Members will only be compelled to fight for its protection if they hear real stories from all of you.

    Call to Action: Initial Emails to Your Members of Congress – Figure out who your three Members of Congress (2 Senators and 1 Representative) are by using and Using their websites, figure out the best way to contact each of them (often it will be through an email or a form on their website). Email each of them and explain the importance of adoption and ask for their support in protecting the credit.

    Speak from the heart and share your story about why the ATC is important to children, your family, or others in your life. Go to for more information.

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