The year 2020 has been nothing short of chaotic.

Due to the upheaval caused by the coronavirus, the IRS has postponed the traditional April 15 tax filing deadline to July 15. As you put the finishing touches on your tax documents, it is important to remember the adoption tax credit. Adoption is costly and every cent counts as you bear the financial costs of the adoption process.

How Much Is The Credit Worth?

The adoption tax credit can provide up to $14,300 for qualified adoption expenses. That amount is per each adopted child and applies to domestic and international adoptions, including private adoptions and adoptions facilitated via public foster care.  The credit begins to phase out for filers once their income reaches $214,520 and phases out completely for filers at or above $254,520.

Does The Credit Cover Intrafamily Adoptions?

Kinship or family adoptions do qualify for the credit. Step-parent adoptions are the exception; they do not qualify for the credit.

When Can You Take The Credit?

Individual or joint filers can take the credit as soon as the year the adoption expenses are incurred, depending on the type of adoption. Sometimes you must wait until the adoption is finalized. There may be reasons to take a partial amount of the credit one year and the rest in subsequent years to maximize the tax benefits. The credit can be “carried forward” for up to five years until the $14,300 per child has been exhausted. It is important to speak to a tax professional about your circumstances so you can make an informed decision.

Is The Credit Refundable?

No, the adoption tax credit is not refundable for 2020. This means you can only use the credit if you have federal income tax liability. As mentioned above though, you can “carry forward” any unused credit for up to five years. A tax professional can help you determine if you qualify for the credit this year.

Learn more about the adoption credit.

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The Law Center