Adoption Tax Credit

[Laurencclark14]

We paid $14,500 to a Nonprofit for adoption in January 2023 (Everlasting Adoptions, an adoption placement agency), ended up not proceeding with adoption process and fee was non-refundable from Non-profit. Can I still claim the adoption credit for the 2023 tax year? How do I make sure to get that credit?

[carolineb · Accepted solution]

Hello Laurencclark14, 

I am sorry to hear about the failed adoption process. However, the credit is allowable if the adoption process is domestic. A domestic adoption is the adoption of a U.S. child (an eligible child who is a citizen or resident of the U.S. or its possessions before the adoption effort begins). Qualified adoption expenses paid before the year the adoption becomes final are allowable as a credit for the tax year following the year of payment (even if the adoption is never finalized and even if an eligible child was never identified).

In your case, you would claim the credit in tax year 2024 by including Form 8839 with your individual tax return. You can find the Adoption Credit entry screens in TurboTax under Federal>Deductions and Credits. The Adoption Credit is a non-refundable credit, meaning that it will offset any tax liability that you have for tax year 2024, but any overage will not become part of your refund amount. Rather, it will carry over to be used against your tax liability for subsequent years until fully used. 

[Laurencclark14]

Thank you for the information. Just to clarify: we paid the agency adoption fee in 2023 expecting to adopt a US child.  A child was never identified before we decided to not proceed with adoption. We can’t claim the adoption tax credit until tax year 2024 (so filing in 2025), even though we spent the money in 2023 and we definitively decided to cancel adoption proceedings. Is that correct?

[carolineb · Accepted solution]

That is correct!