Adoption Tax Credit 2023: A Comprehensive Guide
The adoption tax credit is a valuable financial benefit for families who adopt a child. This credit can help offset the significant costs associated with adoption, making it a more attainable goal for many families.
What is the Adoption Tax Credit?
The Adoption Tax Credit is a nonrefundable tax credit that can help families reduce their federal income tax liability. The credit is available for expenses related to adopting a child, including legal fees, travel, and court costs.
Who Qualifies for the Adoption Tax Credit?
To be eligible for the Adoption Tax Credit, you must meet the following criteria:
- Adopting a child: You must be adopting a child who is under 18 years old or who is physically or mentally incapable of self-care.
- U.S. Citizen or Resident: You must be a U.S. citizen or resident alien.
- Qualified Adoption Expenses: You must have incurred qualified adoption expenses during the tax year.
- Taxpayer Filing Status: The taxpayer must file as single, married filing jointly, head of household, or qualifying widow(er).
How Much is the Adoption Tax Credit?
The maximum Adoption Tax Credit amount for 2023 is $14,890. The amount of the credit you can claim depends on your adjusted gross income (AGI).
2023 Adoption Tax Credit Amount Based on AGI:
- AGI up to $216,700 (married filing jointly, or qualifying widow(er)) or $108,350 (single, or head of household): The full credit amount of $14,890 is available.
- AGI between $216,701 and $226,700 (married filing jointly, or qualifying widow(er)) or $108,351 and $113,350 (single, or head of household): The credit amount is reduced by 5% for every $1,000 or portion of $1,000 that your AGI exceeds the phase-out threshold.
- AGI over $226,700 (married filing jointly, or qualifying widow(er)) or $113,350 (single, or head of household): The credit is not available.
What Expenses Qualify for the Adoption Tax Credit?
Qualified adoption expenses include:
- Legal Fees: This includes attorney fees, court costs, and other legal expenses.
- Travel Expenses: This includes travel expenses to see the child, visit the country of origin, and travel to and from court hearings.
- Adoption Agency Fees: This includes fees charged by adoption agencies or facilitators.
- Living Expenses: This includes expenses for the adoptive child while they are living with you before the adoption is finalized.
How to Claim the Adoption Tax Credit:
To claim the Adoption Tax Credit, you need to file Form 8839, Qualified Adoption Expenses. You can claim the credit on Form 1040, Schedule 8839.
Important Notes:
- Nonrefundable Credit: The Adoption Tax Credit is a nonrefundable credit. This means that the credit can only reduce your tax liability to zero. If your credit is more than your tax liability, you will not receive a refund.
- Adoption Expenses Incurred Before Adoption: You can only claim the Adoption Tax Credit for expenses incurred after December 31, 2001.
- More Than One Child: You can claim the Adoption Tax Credit for multiple children, but the maximum credit per tax year is $14,890.
- Adoption of a Child with Special Needs: There is a special rule for families who adopt children with special needs. This rule allows families to claim an adoption tax credit even if they do not meet the normal income requirements.
Conclusion:
The Adoption Tax Credit can be a significant financial benefit for families who are adopting a child. By understanding the eligibility requirements and the credit amount, families can take advantage of this valuable tax break to help offset the cost of adoption.
