Can I deduct expenses for adopting a child in 2025?

by | May 9, 2025 | Deductions, Individual Taxes

Here’s what HIVE AI had to say about “Can I deduct expenses for adopting a child in 2025?”:

Adoption Expense Deduction and Credit for 2025

Yes, you can deduct expenses for adopting a child in 2025, but it’s important to understand that this tax benefit comes in the form of a tax credit rather than a deduction. The adoption tax credit is more valuable than a deduction because it directly reduces your tax liability dollar-for-dollar, rather than just reducing your taxable income.

Adoption Credit Amount for 2025

For the 2025 tax year, the maximum adoption credit will be $17,280 per eligible child. For taxable years beginning in 2025, the credit allowed for an adoption of a child with special needs is $17,280. For other adoptions, the maximum credit allowed is the amount of qualified adoption expenses up to $17,280. Rev. Proc. 2024-40

The IRS has confirmed in its inflation adjustments for tax year 2025 that the maximum credit allowed for an adoption of a child with special needs is the amount of qualified adoption expenses up to $17,280, increased from $16,810 for tax year 2024. IRS Newsroom – IR-2024-273 – IRS releases tax inflation adjustments for tax year 2025

Income Limitations

The adoption credit is subject to income limitations:

The available adoption credit begins to phase out for taxpayers with modified adjusted gross income (MAGI) in excess of $259,190 and is completely phased out for taxpayers with modified adjusted gross income of $299,190 or more. Rev. Proc. 2024-40

The amount excludable from gross income will be reduced (but not below zero) by an amount which bears the same ratio to the amount so excludable as the amount by which the taxpayer’s adjusted gross income exceeds $150,000, bears to $40,000. For purposes of this calculation, adjusted gross income is determined without regard to the adoption credit itself and certain other provisions. IRC § 137(b)

Qualified Adoption Expenses

In the case of an individual, there shall be allowed as a credit against the tax imposed the amount of the qualified adoption expenses paid or incurred by the taxpayer. IRC § 23(a)

Qualified adoption expenses include:

Qualifying adoption expenses include:

  • Adoption fees
  • Court costs
  • Attorney fees
  • Travel expenses (including amounts spent for meals and lodging) while away from home
  • Other expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child

An expense may be a qualified adoption expense even if the expense is paid before an eligible child has been identified. For example, prospective adoptive parents who pay for a home study at the outset of an adoption effort may treat the fees as qualified adoption expenses. IRS IRM 4.19.15 Discretionary Programs

Expenses That Don’t Qualify

The following expenses are not allowable and do not qualify for the Adoption Credit:

  • That violate state or federal law
  • For the purpose of carrying out any surrogate parenting arrangement
  • For the adoption of a spouse’s child
  • Paid using funds received from any federal, state, or local program
  • Allowed as a credit or deduction under any other provision of federal income tax law
  • Reimbursed by an employer
  • Any other expense that is not directly related to, and whose principal purpose is not for, the legal adoption of an eligible child IRS IRM 4.19.15 Discretionary Programs

Timing of the Credit

The timing of when you can claim the credit depends on when the adoption becomes final:

The credit with respect to any expense shall be allowed: (A) in the case of any expense paid or incurred before the taxable year in which such adoption becomes final, for the taxable year following the taxable year during which such expense is paid or incurred, and (B) in the case of an expense paid or incurred during or after the taxable year in which such adoption becomes final, for the taxable year in which such expense is paid or incurred. IRC § 23(a)

Unfortunately, the rule for parents is that until the adoption becomes final, those expenses don’t generate a credit. This is contrary to the usual pattern in American tax law where you take your deductions in the year you actually pay them out if you’re an individual. But for whatever reason, Congress decided to go with a more formal route here, and rather than allow people the deductions or credit in the year in which they expended the money, Congress decided to give them only in the year in which the adoption becomes final. This benefits people, of course, whose income goes down in the next year or that remains steady in the next year. Dawson U.S. Tax Court Opinions: Cory Joseph & Martha Erin Hoeppner

Special Needs Adoptions

If you adopt a child with special needs, you may be eligible for the full credit amount regardless of your actual expenses:

In the case of an adoption of a child with special needs which becomes final during a taxable year, the taxpayer shall be treated as having paid during such year qualified adoption expenses with respect to such adoption in an amount equal to the excess (if any) of $10,000 over the aggregate qualified adoption expenses actually paid or incurred by the taxpayer with respect to such adoption during such taxable year and all prior taxable years. IRC § 23(a)

Note that while the base amount mentioned in the code is $10,000, this has been adjusted for inflation to $17,280 for 2025.

Foreign Adoptions

In the case of an adoption of a child who is not a citizen or resident of the United States: (1) the credit shall not apply to any qualified adoption expense with respect to such adoption unless such adoption becomes final, and (2) any such expense which is paid or incurred before the taxable year in which such adoption becomes final shall be taken into account as if such expense were paid or incurred during such year. IRC § 23(e)

Filing Requirements

Married couples must file joint returns to claim the adoption credit. Rules similar to those for the child and dependent care credit apply for purposes of the adoption credit. IRC § 23(f)

No credit shall be allowed with respect to any eligible child unless the taxpayer includes (if known) the name, age, and TIN (Taxpayer Identification Number) of such child on the tax return for the taxable year. The Secretary may, in lieu of this information, require other information meeting the same purposes, including identification of an agent assisting with the adoption. IRC § 23(f)

In order to claim adoption credit in the year it is first allowable, individuals must file as single, married filing jointly, head of household, or as qualifying widow(er). If the individual’s filing status is married filing separately in the year that particular adoption credit first become allowable, the individual will never be eligible to claim a credit or exclusion for that adoption credit unless they file an amended return, using married filing jointly status, within the period of the statute of limitations. However, an individual who is married filing separately may claim an adoption credit carryforward from a prior year or years, provided that, if the individual was married in the year in which the adoption credit first became allowable, the individual filed a joint return for that year. IRS IRM 4.19.15 Discretionary Programs

Documentation Requirements

Acceptable proof of expenses include checks and receipts showing proof of payment. IRS IRM 4.19.15 Discretionary Programs

You should maintain detailed records of all adoption-related expenses, including:

  • Receipts for all adoption fees
  • Documentation of court costs
  • Attorney billing statements
  • Travel receipts (airfare, hotels, meals)
  • Home study fees
  • Any other expenses directly related to the adoption

Employer-Provided Adoption Benefits

If your employer provides adoption assistance benefits, these may be excludable from your income up to certain limits. This is separate from, but coordinated with, the adoption credit.

Adoption expenses, including fees paid to an adoption agency and the costs of keeping a child in your home before the adoption is final, may be eligible for a tax credit. Also, you may be able to exclude from your gross income amounts paid or reimbursed by your employer for your adoption expenses. See Form 8839 Qualified Adoption Expenses. IRS – Publication 526: Charitable Contributions

Conclusion

The adoption tax credit provides significant tax relief for families who adopt children. For 2025, you can claim up to $17,280 per eligible child, subject to income limitations. Remember that this is a credit, not a deduction, which means it directly reduces your tax liability dollar-for-dollar.

To maximize your benefit:

  • Keep detailed records of all adoption-related expenses
  • Understand the timing rules for when expenses can be claimed
  • Be aware of the income limitations that may reduce your available credit
  • File the appropriate tax status (generally married filing jointly if married)
  • Include all required information about the adopted child on your tax return

If you’re planning an adoption, consider consulting with a tax professional who can help you navigate these rules and maximize your tax benefits.

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