Adoption Tax Credit

Good news for Guardianship adoption clients:

The IRS has rules that may allow adopting parents--but not adopting stepparents--to receive a tax credit for qualified, unreimbursed adoption-related expenses. This is a powerful provision because your tax liability is reduced by the amount of credit, up to a limit.

Qualified adoption-related expenses include:

• costs for home studies and background checks

• adoption agency fees

• attorney and legal fees

• adoption-related travel expenses.

However, adoption expenses that are reimbursed by an employer or by a government agency such as DCFS do not qualify. So, foster parents reimbursed by DCFS do not get the credit.

In 2021, the maximum adoption tax credit was $14,440 per child. And this amount may be carried forward for up to five years. Consult with your tax advisor about the current IRS rules, since the amount of the credit may change year to year.

The first year the credit may be claimed is the year in which the adoption is finalized. Use IRS Form 8839, the instructions for which are here: https://www.irs.gov/pub/irs-pdf/i8839.pdf.

Utah Adoption Law Center, of course, is not qualified to give tax advice, so please contact your certified tax advisor for guidance.