Adding a child to your family through adoption can be a wonderful experience, but it can also cost a lot. The good news is that there is a federal tax break that could help.
The adoption tax credit is a tax credit that can’t be returned and is meant to help people pay for the qualified costs of adopting a child. This credit has been raised for 2024 and has been adjusted for inflation.
Also, the IRS just recently announced that the adoption tax credit and other important family tax breaks will be adjusted for inflation for 2025. You’ll include these changes in your tax returns that you file in early 2026.
Understanding the Adoption Tax Credit
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You might be able to get the helpful adoption tax credit if you are thinking about adopting a child or have already did so. This credit is given for every child adopted, whether they came from public foster care, a private adoption in the United States, or an adoption from another country.
One of its benefits is that it is flexible: since it is a nonrefundable credit, you can carry over any unused portion for up to five years, making sure you get the full benefit over time.
2024 Adoption Tax Credit Amounts
It is the goal of the 2024 adoption tax credit to make the costs of adoption less stressful. This credit can help you save a lot of money on adoption costs, whether you’re adopting within the United States, privately, through foster care, or even internationally.
Since you can’t get this tax break back, it can lower your tax bill to zero. Not if your expenses are less than the maximum credit, though. You won’t get the difference back.
- Domestic Adoption: Applicable to private and foster care adoptions within the country.
- International Adoption: Covers the adoption of children from other countries.
- Nonrefundable Nature: Remember, it reduces tax liability but does not provide a refund for expenses below the credit amount.
- Carry Forward Option: Unused credits can be carried forward up to five years, ensuring you can maximize the benefit over time.
Adopting families can focus on the joy of growing their family instead of worrying about money now that they know these tips.
People who want to file their taxes early in 2025 for the 2024 tax year will be happy to hear that the maximum adoption credit has gone up from $15,950 in 2023 to $16,810. For tax years 2025 through early 2026, the amount will go up even more, to $17,280.
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