How does adoption affect taxes?

[NerdLeader]

Hello.  My wife and I adopted a baby last year and I wanted to know how that would change our tax filing.  Are there special deductions we can take due to this?  Are there specific options we would need to choose in order to properly file our taxes?

[MonikaK1]

Tax benefits for adoption include both a tax credit for qualified adoption expenses paid to adopt an eligible child and an exclusion from income for employer-provided adoption assistance. 

To enter the expenses and assistance payments in TurboTax:

1. Open or continue your return if it isn't already open.
2. Search for adoption credit and select the Jump to link, or find it in the list under Deductions and Credits, You and Your Family.
3. On the "Did you pay any adoption expenses in 2023 or earlier?" or the "Credit for Adoption Expenses" screen, read the information and, if you qualify, answer Yes. This includes carryovers from prior years.
4. Continue answering questions until the section is completed.

Once you calculate your qualified adoption expenses, you enter information about the adopted children in Part I, calculate the amount of the adoption credit in Part II, and enter information about any employer-provided adoption benefits in Part III.

You can only apply nonrefundable credits including the Adoption Credit against regular income tax.  

See this TurboTax tips article for more information.

See also IRS Tax Topics 607.