Congratulations! The adoption credit is a non-refundable credit. The maximum credit for 2023 is 15,950 and phases out if your income gets too high. A non-refundable credit means that it can be used to reduce your tax liability, but once that is at zero, you don’t get the rest as a refund. You can carry it over to the next year for up to five years.
- The expenses for a domestic adoption paid before the year the adoption becomes final are allowable as a credit for the year after payment even if it never becomes final.
- Yes, you can take the credit for multiple years. The timing will depend on if the adoption is finalized in 2024.
- A domestic adoption does not have to be finalized in order for the expenses to be counted as a credit.
- It’s a non-refundable credit. Please make sure the expenses you claim towards the credit are qualified expenses.
Please see this handy IRS topic overview for some great information.
Hope this helps!
Cindy
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