Adoption Tax Credit 2022: How to Qualify?

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Adopting a child is an incredible and rewarding experience for many families. But the cost of raising a child can be expensive, adding even more financial stress for already stretched parents. The Federal Adoption Tax Credit Program was designed to help ease some of this burden by offering credit to those who adopt a child.

Adoption Tax Credit 2022 will allow even more families to provide homes to children in need forever. Discover today how this program can give your family a chance to bring love, joy, and savings into your home.

Key Takeaways

  • The maximum Adoption Credit of up to $14,890 per adopted child and the modified adjusted gross income limits for full credit eligibility in 2022.
  • In 2022, you may qualify for the full credit if your modified adjusted gross income is less than $223,410. However, the amount of credit available starts reducing once your income passes $223,410 and ends when it reaches $263,410.
  • Adopted children with special needs can generally claim the full credit in the year of finalization without basing it on expenses.
  • Qualified adoption expenses are reasonable and necessary expenses paid to complete the adoption that has not been reimbursed by anyone else.

What is Adoption Tax Credit?

The adoption Tax Credit is available to adoptive individuals and families. Adoption Tax Credit can help offset the costs associated with private domestic adoptions, international foster care, and special needs adoptions.

The credit may be claimed on the federal income tax return for the year the adoption became final or the preceding tax year if certain conditions are met. This financial support can alleviate some of the stress of adopting and make it more possible for families to pursue their dreams of growing through adoption.

Eligibility of 2022 Adoption Tax Credit

Adoptive parents in 2022 can claim adoption credit if they meet the eligibility requirements: 

  • Have adopted a child other than a stepchild – Adopting a child under 18 or physically or mentally unable to care for themselves.
  • Be within the income limits – The amount of credit you can claim depends on your modified adjusted gross income.

Adoption Tax Credit 2022 Limit: Modified Adjusted Gross Income

For 2022, full credit is available up to $223,410 in Modified Adjusted Gross Income, partial credit from $223,410 to $263,410, and no credit beyond that.

Federal Adoption Tax Credit is non-refundable, meaning taxpayers can only use it if they have federal income tax liability. So if you don’t use its total value in the first year, you can carry forward any remaining balance for up to five years.

Special Needs – Exception of Adoption Tax Credit

If you adopt a child with special needs, you can get the maximum 2022 Adoption Tax Credit in the year the adoption is finalized. These are the conditions they must meet:

  • When an adoption effort began, the child had to be a citizen or resident of the United States or any of its territories.
  • The state has determined that the child they are unable or shouldn’t be returned to their parent’s home.
  • The state must determine that the child wouldn’t have been adopted without the assistance provided to the adoptive family.

How Much Can You Get From The 2022 Adoption Tax Credit?

The Affordable Care Act adjusts the credit yearly to keep up with inflation. If you adopted a child in 2022, you would be eligible for the maximum amount of $14,890 per eligible child with qualified adoption expenses. For 2023, you can receive up to $15,950 per eligible child as a tax credit when adopting.

Additionally, you can save any unused portion of your federal adoption tax credit and use it to reduce your taxes for up to five years. Furthermore, you can use as much of the distinction as the total amount of your federal income tax liability.

For example, If you spend up to $10,000 on eligible expenses in 2022 and your MAGI (Modified Adjusted Gross Income) is below $223,410, you can claim a credit worth up to $10,000. In case of spending more than this – for example, $25,000 on qualified adoption expenses – the maximum amount of credit still applies is only $14,890.


Situations when Claiming The Credit

Claiming an adoption tax credit will never be difficult when you know the rules. There are three specific cases to consider when assessing which is suitable for your situation:

  • For those who adopt a child with special needs and do not base the request on expenses, you can claim the credit in the year of finalization.
  • Parents who adopt internationally must wait until the year of finalization to claim the credit.
  • Qualified adoption expenses paid before the year the adoption becomes final are allowable as a credit for the tax year following the year of payment.

For example, Mr. Joe began adopting a U.S. child in 2020 and spent $5,000 that year on adoption expenses. In 2021 he had to pay another $6,000; in 2022, he spent $3,000 before the adoption was finalized. No cost was allowable in 2020; $5000 (from 2020) is acceptable in 2021; and $9000 ($6000+$3,000) in 2022 since it’s a finalized year.

Documentation of your adopted child qualifies

After knowing your situation, you ensure to get paperwork, evidence of qualifying expenses, and any documents certifying that the adopted child has special needs (if necessary). These may include:

  • Signed adoption assistance agreement from the state
  • Certificate verifying that the child has special needs and authorization to receive adoption aid (if any)
  • Certification of permission to receive adoption credit

What expenses would be considered qualified adoption expenses?

Everyone can become confused by expenses associated with adoption, so it’s important to remember that qualifying adoption expenses only have the following:

  • Reasonable and necessary adoption fees,
  • Court costs and attorney fees,
  • Traveling expenses (including amounts spent for meals and lodging while away from home)
  • Other expenses are directly related to and for the principal purpose of legally adopting an eligible child.

Qualified expenses may be claimed even if paid before the eligible child is identified. Costs for adopting the child of your spouse are not eligible. And if you’re in a state that allows same-sex second-parent or co-parent adoption, qualified fees paid by a registered domestic partner can also be claimed.

Bonus Content: Interaction with the Child Tax Credit and Employer-provided Adoption Benefits?

How Adoption Tax Credit can interact with Child Tax Credit

The Adoption Tax Credit and Child Tax Credit benefit adoptive parents; however, some differences exist. The Adoption Tax Credit applies to specific adoption-related expenses totaling up to $14,890 per child. This doesn’t apply to the Child Tax Credit or other credits available such as the Earned Income Credit.

The adoption Child Tax credit is non-refundable, while the Additional Child Tax Credit (ACTC) (a part of a child tax credit) is refundable. For 2022, the maximum credit amount of ACTC is $1,500 per child.


Mrs. Jane adopted two brothers who were determined to have special needs. She had $6,000 of federal income tax deducted from her paychecks, and her total tax liability was $8,000. In this case, they would owe the IRS $2,000. She can use the Adoption Tax Credit of $29,780 ($14,890 x 2) and the Additional Child Tax Credit of up to $3,000 ($1,500 x 2) when filing their 2022 taxes.

The remaining tax liability is $2,000. They have an Adoption tax credit of 29,780 and an ACTC of $2,800. Only $2,800 is refundable; $22,780 will be carried forward for up to five years.

Discover Employer-provided Adoption Benefits

Employer-provided adoption benefits are payments to you or a third party for qualified adoption-related expenses. These can be excluded from your taxable income up to $14,890 in 2022.

However, if you want to claim the maximum Adoption Tax Credit for unreimbursed expenses, you must have spent this money on eligible adoption costs; it cannot be reimbursed by your employer or state agency. You could get full credit if you adopted a special needs person.

Final Thoughts: Get Potential Savings with Adoption Tax Credit

The Adoption Tax Credit can be a great way to save money and provide financial assistance for those considering adopting a child. Understanding the eligibility requirements, income limits, and documentation needed to take full advantage of these credits is essential.

Additionally, keeping track of expenses associated with adoption and understanding what qualifies as an eligible expense can help maximize potential savings from this tax credit. Researching all aspects of Adoption Tax Credits will ensure you receive the maximum benefit when it comes time to file taxes!

Take advantage of the incredible savings that adoption tax credits can offer!

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