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Adoption Tax Credit: Eligible Parents May Get Up To $14,890 In Cash; Are You Eligible?

Adoption Tax Credit
An Ecuadorian teenage mother holds her child during a session with Leonela Valerezo, psychopedagogue of the "Hogar Valle Feliz" reception center, in Santo Domingo de los Colorados, Ecuador, on January 17, 2020. - Ecuadorian nuns are putting into practice a new mechanism to receive abandoned babies which consists on keeping the mother's anonymity. (Photo by Rodrigo BUENDIA / AFP) (Photo by RODRIGO BUENDIA/AFP via Getty Images)

The Internal Revenue Service has officially declared that families who underwent an adoption during 2022 can now claim up to $14,890 in eligible adoption expenditures for each eligible child under Adoption Tax Credit. 

There are several methods for people with children to receive advantages or avoid paying taxes because of them, especially for those who started as parents this past year.

Adoption Tax Credit

MIAMI, FL – NOVEMBER 20: Nathalie Ogando sits with her adopted cousin, Lean Martinez,5, after she was adopted during a ceremony in an adoption court on National Adoption Day marked at the Miami Children’s Museum on November 20, 2015 in Miami, Florida. Judges from Miami-Dade County Juvenile Court officiate the finalizing of more than 50 adoptions in courtrooms set up inside the museum on the day when a national effort is given to raise awareness of the more than 100,000 children in foster care waiting to find permanent families. (Photo by Joe Raedle/Getty Images)

Adoption Tax Credit: Eligible Parents May Get Up to $14,890

For some adoption-related costs, the IRS allows a credit against taxes (i.e., a direct reduction in taxes, not only a tax deduction). This is under the new tax tip 2023-06 dated January 23: “The adoption tax credit helps families with adoption-related taxes.”

That means adoptive parents can also get a tax credit to get a bigger tax refund this year.

International, domestic, private, and public foster care adoptions are all eligible for this adoption tax credit worth up to $14,890. 

Anyone under 18 years old incapable of caring for themselves physically or mentally qualifies as an eligible child, The Sun said.

This credit can be used to offset certain qualified expenditures, including court fees, adoption-related travel expenses, and any other costs directly associated with the lawful adoption of an eligible child.

ALSO READ: IRS: Adoption Tax Credit

Adoption Expenses Qualified Under Tax Credit

To find out exactly what is permitted, taxpayers can check out TOPIC 607. But here’s a synopsis: 

  • Fees for adoption 
  • Legal fees and court costs 
  • travel costs linked to adoption, such as hotel and food 
  • Other costs directly connected to the formal adoption of a child who qualifies 

Even if the taxpayer incurs costs before the identification of an eligible kid, the costs may still be deducted. As an illustration, some prospective adoptive parents spend money on a home study at the start of the adoption procedure. The costs are allowable adoption expenditures for these parents. 

The cost of adopting a spouse’s kid is not included in the list of qualified adoption expenditures.

How to Claim Tax

Taxpayers must fill out Form 8839, Qualified Adoption Expenses, and include it with their tax return to claim the adoption tax credit. 

There are certain restrictions, though: 

  • There are no credit limitations if your modified adjusted gross income (MAGI) is less than $223,410, so you don’t need to worry. 
  • Your credit limit, however, phases out if your MAGI is more than that amount, up to $263,410. The IRS document Topic 607 Adoption Credit and Adoption Assistance Programs contain information on this. 
  • Additionally, a tax refund cannot be obtained from the credit. Only a tax decrease to zero may be expected as a result. Any extra tax credit must be carried over to your following year’s filing.

Additionally, a tax refund cannot be obtained from the credit. Only a tax decrease to zero may be expected as a result. Any extra tax credit must be carried over to your following year’s filing.