My wife and I are looking to adopt a domestic US-born child. We haven’t identified a child yet, but we are hopefully we will identify and adopt a child soon. So far, we have incurred adoption related expenses in 2023 and 2024.We started the adoption journey in Jan 2023. We have incurred approx. $8K of adoption expenses in 2023 and approx. $4K of adoption related expense so far in 2024.Question:can we deduct the expenses and/or receive the adoption credit for 2023?can we deduct the expenses and/or receive the adoption credit for 2024?Could the credit be taken away by the IRS if we never identify a child or finalize adoption?Looking at my tax situation for 2023, I expect to receive a small refund for 2023. Will I receive the adoption credit as a refund for 2023?What other things do I need to know about adoption credit?Thanks!

Congratulations! The adoption credit is a non-refundable credit. The maximum credit for 2023 is 15,950 and phases out if your income gets too high. A non-refundable credit means that it can be used to reduce your tax liability, but once that is at zero, you don’t get the rest as a refund. You can carry it over to the next year for up to five years. The expenses for a domestic adoption paid before the year the adoption becomes final are allowable as a credit for the year after payment even if it never becomes final.Yes, you can take the credit for multiple years. The timing will depend on if the adoption is finalized in 2024.A domestic adoption does not have to be finalized in order for the expenses to be counted as a credit. It’s a non-refundable credit. Please make sure the expenses you claim towards the credit are qualified expenses.Please see this handy IRS topic overview for some great information. Hope this helps!Cindy

M

meehir007

Question

First time dealing with Adoption Credit...Help pls

Forum|Forum|1 year ago
September 25, 2024
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My wife and I are looking to adopt a domestic US-born child. We haven’t identified a child yet, but we are hopefully we will identify and adopt a child soon. So far, we have incurred adoption related expenses in 2023 and 2024.

We started the adoption journey in Jan 2023. We have incurred approx. $8K of adoption expenses in 2023 and approx. $4K of adoption related expense so far in 2024.

Question:

can we deduct the expenses and/or receive the adoption credit for 2023?
can we deduct the expenses and/or receive the adoption credit for 2024?
Could the credit be taken away by the IRS if we never identify a child or finalize adoption?
Looking at my tax situation for 2023, I expect to receive a small refund for 2023. Will I receive the adoption credit as a refund for 2023?
What other things do I need to know about adoption credit?

Thanks!

Cindy4 12

Congratulations! The adoption credit is a non-refundable credit. The maximum credit for 2023 is 15,950 and phases out if your income gets too high. A non-refundable credit means that it can be used to reduce your tax liability, but once that is at zero, you don’t get the rest as a refund. You can carry it over to the next year for up to five years.

The expenses for a domestic adoption paid before the year the adoption becomes final are allowable as a credit for the year after payment even if it never becomes final.
Yes, you can take the credit for multiple years. The timing will depend on if the adoption is finalized in 2024.
A domestic adoption does not have to be finalized in order for the expenses to be counted as a credit.
It’s a non-refundable credit. Please make sure the expenses you claim towards the credit are qualified expenses.

Please see this handy IRS topic overview for some great information.

Hope this helps!

Cindy

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