It depends. The credit is a non-refundable credit which means that it can lower your tax bill but will not produce a refund due to the credit. However, if the entire credit is not used, any remaining amount can be carried forward for up to five years.
The credit only helps if you owe taxes. If you typically do not owe taxes, then it may never help you. I advise my adoption clients to consider changing their tax exemptions at their jobs so they can take advantage of the credit.
The IRS consolidates a majority of the reporting for adoption-related expenses on Form 8839, Qualified Adoption Expenses. Filers must include every qualified expense from the tax year in question on that form to be eligible for the adoption tax credit.
- For 2017, the maximum credit adoptive parents are granted is $13,570 per eligible child.
An eligible child is defined as any person who is under the age of 18 or any person who—regardless of age—is physically or mentally unable to take care of him- or herself.
Any reasonable and necessary expenses directly related to the legal adoption of any child are eligible for reimbursement or refund through the adoption tax credit. Those expenses include:
- court costs and attorney fees
- home studies
- and any traveling expenses related to the adoption
However, adoptive parents should not automatically assume they qualify. The ceiling amount of the adoption credit is available only if you spent that amount in qualified adoption expenses which were not reimbursed by an employer or state agency or if the adopted person is one with special needs.
- If you spent less than the cap, you will receive a credit for only for the amount you spent.
- In addition, if your modified adjusted gross income is more than $203,540, your credit is reduced until modified adjusted gross income is $243,540 or more, when the credit is no longer available.