How to Claim the 2018 Adoption Tax Credit

It feels like we all just did this financial dance, but tax season is here again. For many adoptive families, that means taking advantage of the Adoption Tax Credit. Here’s what you need to know about this benefit, and how it can help your family:

What Is the Adoption Tax Credit?

The purpose of the Federal Adoption Tax Credit is to help offset some of the financial burden of adoption for families, which, as you likely know, can be very costly.

The tax credit is one way that federal and state governments try to help keep adoption affordable for families. It’s an important financial resource, particularly for the families who struggle to afford this family-building option and for the children who are in need of adoptive families.

Who Can Claim It?

If you paid “qualifying adoption expenses” in 2018, you may be eligible to benefit from the Adoption Tax Credit. The credit is nonrefundable, so it only benefits individuals with tax liability (taxes owed).

Some of the “qualified adoption expenses” that the IRS would deem eligible include:

  • Adoption agency expenses
  • Adoption attorney expenses
  • Court expenses
  • Adoption-related travel costs
  • Re-adoption costs for international adoptions

So, if you paid any of those expenses in 2018, you may be eligible to claim the Adoption Tax Credit.

If you work for a company that has adoption benefits and you used those employer-provided benefits to reimburse adoption expenses this year, you likely won’t be eligible for the Adoption Tax Credit, although you should check with your tax professional to be sure in your situation.

There’s also an income limit on the tax credit based on modified adjusted gross income (MAGI). For 2018, the maximum amount available begins to phase out for families who earn more than $207,580. The income limit is recalculated every year to account for the current cost of living.

Some families are filing taxes while they’re waiting for their child’s adoption to be finalized, so they don’t have their child’s social security number yet. You’ll still likely be eligible for the 2018 Adoption Tax Credit. You can apply for a temporary tax identification number for your baby if you’re unable to receive his or her SSN prior to filing your taxes.

How Much is the 2018 Adoption Tax Credit?

The maximum amount available for the 2018 Federal Adoption Tax Credit is $13,840 per child.

If you adopted a child from foster care, or a child that the state would define as special needs or hard-to-place, then the credit may remain flat for you regardless of expenses, allowing you to claim as much as possible.

Some states offer an additional tax credit to local adoptive families. That amount, and eligibility requirements, will vary by state.

You can learn more about how to file for the Adoption Tax Credit on the IRS’ website, and you can find the form there, as well.

If you need help sorting out whether or not you’re eligible for the 2018 Adoption Tax Credit, or if you need help filing for this benefit, talking to a qualified tax professional will always be your best option. (Remember, while we hope you found this post helpful, it is not a substitute for professional tax advice!) Happy filing!

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