Understanding the Nonrefundable Adoption Credit: Eligibility and Special Needs

Use this simple yes/no list to see if the adoption credit could help you this tax year. The adoption credit is nonrefundable and helps cover qualified costs to adopt an eligible child.

Answer “Yes” to all that apply:
– Did you pay qualified costs to adopt an eligible child in 2024 (or in earlier years if timing rules allow you to claim them now)? Yes/No
– Is your modified adjusted gross income (MAGI) below $292,150 for 2024 (with phaseout starting at $252,150)? Yes/No
– If you’re married, will you file a joint return (unless you meet the special rules for those considered unmarried)? Yes/No
– Do your expenses meet the rules for qualified adoption expenses and are not reimbursed by another person or program? Yes/No
– If the adoption involves a child with special needs, do you have the state’s written determination of special needs? Yes/No
– If the adoption involves a foreign child, did the adoption become final in 2024? Yes/No

If you answered “Yes” to most questions above (and “Yes” to all that apply to your situation), you likely qualify. If you answered “No” to any key item (income too high, wrong filing status, foreign adoption not final), review the disqualifying section and alternatives below.

Who Counts as an Eligible Child?

The term eligible child is central to the adoption credit. A child is eligible if either of these is true:

• The child is under age 18. If the child turned 18 during the year, the child is an eligible child for the part of the year before their 18th birthday.
• The child is physically or mentally unable to care for themselves, at any age.

This definition matters whether you claim the adoption credit for a domestic or foreign adoption. You can only claim qualified expenses for an adoption of an eligible child, unless your case involves a child with special needs, in which the full credit may apply even with no expenses.

What Is a Child With Special Needs for Adoption Credit Purposes?

For the adoption credit, a child with special needs has a specific meaning. All three of the following must be true:

1. The child was a U.S. citizen or resident of the United States 🇺🇸 or its possessions when the adoption effort began.
2. A state (including the District of Columbia) decided the child cannot or should not return to their parents’ home.
3. The state determined the child won’t be adopted unless assistance is provided to the adoptive parents.

States may consider factors like:
– The child’s ethnic background and age
– Membership in a minority or sibling group
– A medical condition or a physical, mental, or emotional handicap

Important distinctions:
– A diagnosis or condition alone is not enough. The state must issue a determination that the child has special needs.
– Foreign children cannot be treated as children with special needs for this credit, even if they have disabilities.
– Even U.S. children with disabilities may not meet this definition unless the state issues the special needs determination.

Why this matters: If you adopt a child with special needs under these rules, you may claim the full adoption credit for 2024 — $16,810 per child — even if you did not pay any qualified adoption expenses.

Income and Filing Status Rules You Must Meet

Your MAGI affects whether you can claim the credit and how much you can use.

For 2024:
– Maximum credit per child: $16,810
– Phaseout begins: $252,150 (MAGI)
– Fully phased out at: $292,150 (MAGI)
– If your income is in the phaseout range, your allowable credit will be reduced.

Filing status rules:
– If you’re married filing separately, you generally cannot claim the credit.
– If married, you must usually file a joint return.
– Exception — considered unmarried: You may claim the credit when married but not filing jointly if you meet all of these:
– You lived apart from your spouse during the last 6 months of the year.
– The eligible child lived in your home for more than half the year.
– You paid over half the cost of keeping up your home.

Qualified Adoption Expenses: What Counts and What Doesn’t

You can claim the adoption credit for reasonable and necessary expenses directly related to the legal adoption of an eligible child.

Qualified expenses include:
– Adoption fees
– Court costs
– Attorney fees
– Travel costs (including meals and lodging) while away from home
– Re-adoption expenses to adopt a foreign child in a U.S. court

Nonqualified expenses include:
– Expenses that break state or federal law
– Any surrogate parenting costs
– Costs to adopt your spouse’s child
– Expenses paid with federal, state, or local program funds
– Expenses already allowed as a credit or deduction under other federal tax rules
– Expenses paid or reimbursed by an employer or any other person or organization
– Expenses paid before 1997

Tip: If another benefit (like employer assistance) covers some expenses, those amounts can’t be reused for the credit.

When to Claim the Adoption Credit

Timing depends on whether the child is a U.S. citizen or resident or a foreign child.

For a U.S. citizen or resident:
– If the adoption is not yet final, you can claim qualified expenses paid in a year before finalization in the year after payment.
– Expenses paid in the year the adoption becomes final are claimed on that year’s return.
– Expenses paid after finalization are claimed in the year of payment.
– You may claim the credit even if the adoption never becomes final for a U.S. child.

For a foreign child:
– You cannot claim the adoption credit or exclusion until the adoption becomes final.

This timing rule is strict. Track expenses by date and match them to the correct filing year.

How Much Can You Claim for 2024?

• If you adopted a child with special needs (as defined for the credit), you can claim $16,810 per eligible child, even with no qualified expenses.
• For other adoptions (child does not meet special needs rules), your maximum credit is the lesser of your qualified adoption expenses or $16,810 per eligible child.
• If you claimed expenses for the same child in a prior year, the maximum credit is reduced by the amount already claimed.
• The credit is nonrefundable — it can lower your tax to zero, but the IRS won’t send you the difference as a refund.
• You can carry forward any unused credit for up to five years.

Important tip: Any expenses above the annual credit amount can’t be carried forward and will never be used for the credit.

Using Employer Adoption Assistance and the Credit Together

Many employers offer adoption assistance. You can often use both the exclusion (which keeps employer reimbursements out of your income) and the adoption credit — but not for the same expense dollars. The rules require you to:

1. Claim any allowable exclusion first.
2. Claim the credit for any remaining qualified expenses.
3. Avoid double-counting the same expense amounts.

Example:
– Paul paid $35,000 in qualified adoption expenses to adopt an eligible foreign child; the adoption became final in 2024.
– His employer reimbursed him the maximum exclusion amount. Paul can exclude that reimbursement from income.
– The remaining expenses of $18,190 stay eligible for the credit.
– Paul’s credit is limited to $16,810 (the 2024 maximum), so $1,380 of his expenses can’t be claimed as a credit or excluded from income.

This shows why it’s vital to track expenses and reimbursements line by line. Keep clean records to assign dollars first to the exclusion, then to the credit.

Disqualifying Factors That Can Block the Credit

You may be ineligible or see your credit reduced if:
– Your MAGI is $292,150 or higher (fully phased out for 2024).
– You’re married filing separately and you don’t meet the “considered unmarried” rules.
– The adoption involves a foreign child and the adoption did not become final.
– You lack a state special needs determination but claim the full special needs credit.
– Your expenses are not qualified, were paid before 1997, or were illegal.
– You used the same expense dollars for another federal tax benefit or they were reimbursed.
– You’re adopting your spouse’s child (those costs are not qualified).
– You cannot show the child meets the eligible child definition.

If any of these apply, review the alternatives and timing rules to see if another path fits your situation.

Alternatives If You Don’t Qualify Now

Consider these options if you can’t claim the adoption credit this year:
– Use the exclusion for employer-provided adoption assistance if available; it’s separate from the credit (but follows similar income limits and timing rules).
– If your credit is more than your tax, apply the carryforward for up to five years.
– If your adoption of a U.S. child is still in progress, watch the timing rules—costs paid before finalization may be claimed in the year after payment, even if the adoption never becomes final.
– If the adoption of a foreign child is still pending, you may become eligible when the adoption becomes final.

According to analysis by VisaVerge.com, many families mix the exclusion and the adoption credit over several tax years, especially when costs span multiple years or when foreign adoptions finalize later than expected.

How to Strengthen Your Claim and Avoid Delays

You don’t need to file supporting documents with your return, but you must keep them on file. Strong records reduce the risk of IRS questions and help you answer any request quickly.

Keep:
– For finalized domestic or foreign adoptions in the United States 🇺🇸: adoption order or decree.
– For domestic adoptions not yet final: an adoption taxpayer identification number (ATIN) for the child, or one of these:
– Home study from an authorized placement agency
– Placement agreement with an authorized placement agency
– Hospital document authorizing release of a newborn to you for adoption
– Court document ordering or approving placement for adoption
– An original affidavit or notarized statement under penalty of perjury from an adoption attorney, government official, or other person in an official role, confirming they placed or are placing a child with you or are facilitating the adoption
– For adoptions of a child with special needs: the state’s written special needs determination

Also keep:
– Itemized receipts for qualified adoption expenses
– Travel logs with dates, destinations, and purposes
– Employer reimbursement statements showing amounts and dates
– A summary spreadsheet that shows expense totals, what was excluded from income, and what is claimed for the credit

Step-by-Step: Filing for the Adoption Credit

1. Confirm the child qualifies as an eligible child and whether they meet the credit’s child with special needs definition.
2. Gather your expense records and separate qualified from nonqualified costs.
3. If you received employer assistance, apply the exclusion first and remove those dollars from your pool of expenses available for the credit.
4. Check your MAGI to see whether you fall in the phaseout range or above it for 2024.
5. Apply the timing rule:
   • U.S. citizen or resident child: claim pre-finalization expenses in the year after payment; claim expenses paid in the finalization year on that year’s return; claim post-finalization expenses in the year of payment; you can claim even if the adoption never becomes final.
   • Foreign child: claim only after the adoption becomes final.
6. Complete Form 8839, Qualified Adoption Expenses, and attach it to your tax return. You can find it at https://www.irs.gov/forms-pubs/about-form-8839.
7. Keep all documents listed in the substantiation section. You don’t need to mail them with your return, but the IRS can ask for them later.
8. If your credit is more than your tax this year, plan to carry forward the unused amount for up to five years.

For official guidance on rules and limits, see IRS Topic No. 607: Adoption Credit and Adoption Assistance Programs.

Clear Examples of Yes/No Outcomes

Yes — you may claim the adoption credit if:
– You paid qualified expenses to adopt a U.S. child, the adoption has not finalized, and you’re claiming costs in the year after payment.
– You adopted a child with special needs (per state determination) who is a U.S. child, even if you had no expenses.
– You adopted a foreign child and the adoption became final in 2024, and you have qualified expenses.

No — you may not claim the adoption credit if:
– You are married filing separately and do not meet the special rules for being considered unmarried.
– Your MAGI is $292,150 or more for 2024.
– You are adopting your spouse’s child, since those costs are not qualified.
– You paid or were reimbursed for expenses by a government program or employer, and you are trying to use those same dollars for the credit.
– You’re adopting a foreign child and the adoption is not yet final.

Practical Scenarios Showing How the Rules Work

• Domestic adoption, not final yet:
  • You paid attorney fees and court costs in 2023 and 2024. For 2023 costs, you would claim them in 2024 (the year after payment). For 2024 costs, if the adoption is still not final, you’d claim those costs in 2025. If the adoption never becomes final, you can still claim eligible expenses for a U.S. child using the timing rule.
• Adoption of a child with special needs:
  • You received a state letter confirming special needs under the adoption credit rules. You may claim $16,810 per eligible child for 2024 even with no expenses. Keep the state determination letter with your records.
• Foreign adoption finalized in 2024:
  • You paid fees in 2022, 2023, and 2024. You can only claim the credit after the adoption is final. So, on your 2024 return, you can claim all qualified expenses, subject to the $16,810 limit and the MAGI phaseout.
• Employer assistance plus the credit:
  • Your employer reimbursed part of your costs. You must apply the exclusion first, then your remaining qualified expenses may qualify for the credit. Do not use the same dollars for both benefits.

How to Avoid Common Mistakes That Trigger Rejections

• Don’t confuse “child with special needs” for the adoption credit with other benefit definitions. The state’s special needs determination is required for this credit’s full amount.
• Don’t claim costs to adopt your spouse’s child—they’re nonqualified.
• Don’t try to claim the credit for a foreign adoption that’s not final yet.
• Don’t double-count the same expense for both the employer exclusion and the credit.
• Don’t file without Form 8839—the IRS requires it for this credit.
• Don’t forget the MAGI phaseout. If you’re near the limit, prepare for a reduced credit.

Your Action Plan for 2024 Filing

• Confirm whether your child meets the eligible child definition and, if applicable, whether the child with special needs criteria are met by a state determination.
• Tally your qualified expenses and separate any amounts that were reimbursed or covered by other programs.
• Review your MAGI and filing status. If married and not filing jointly, check if you meet all three “considered unmarried” tests.
• Apply the timing rules based on whether your adoption is domestic or foreign, and whether it’s finalized.
• Complete Form 8839 and keep all related records. The form is here: https://www.irs.gov/forms-pubs/about-form-8839.
• Consult the official guidance at IRS Topic No. 607: Adoption Credit and Adoption Assistance Programs for definitions, phaseout limits, and filing instructions.

Key Points to Remember

• Maximum credit for 2024: $16,810 per child
• Phaseout range (MAGI): begins at $252,150 and ends at $292,150
• Child with special needs: full credit allowed if state issues determination, even with no expenses
• Foreign adoptions: credit applies only after finalization
• Nonrefundable: unused amounts carry forward up to five years
• Employer assistance: claim the exclusion first, then the credit for any remaining qualified expenses, without double-using the same dollars
• Qualified expenses: adoption fees, court costs, attorney fees, travel (with meals and lodging), and re-adoption costs for foreign children
• Not qualified: surrogate arrangements, adopting a spouse’s child, illegal payments, pre-1997 costs, expenses paid by others or already used for other tax benefits

Final Eligibility Snapshot

You likely qualify for the 2024 adoption credit if:
– You adopted or tried to adopt an eligible child, and you paid qualified adoption expenses (or adopted a child with special needs with a state determination).
– You meet the income and filing status rules.
– You follow the timing rules for U.S. vs. foreign adoptions.
– You avoid double-counting with employer-provided assistance.
– You file Form 8839 with your return and keep proper records.

The adoption credit can ease some of the costs during a life-changing process. Careful recordkeeping, the right timing, and attention to income and filing rules make a big difference. Families who plan ahead—especially when blending the employer exclusion and the credit—tend to make the most of the rules allowed for adopting an eligible child. If your situation changes or finalization occurs later, the carryforward and the timing rules can keep your claim on track in a future year.