The Tax Benefits of Adoption by Joanie B. Stein, CPA

Posted on April 12, 2015 by Joanie Stein

According to the IRS, growing one’s family through adoption may provide adoptive parents with a tax credit or an opportunity to exclude some of their income from taxes. The exclusion only applies when the adoptive parents received assistance from their employers to pay for the adoption through a written qualified adoption assistance program.


The maximum exclusion and non-refundable credit for 2014 is $13,190 per eligible child who is under 18. Both the credit and exclusion are subject to income limitations, which may reduce or eliminate the amount one can claim.


To qualify for either the credit or exclusion of income from taxes, adoptive parents must incur reasonable and necessary expenses, such as adoption fees, court costs, attorney fees and travel, that are related directly to the adoption of a child. Special rules apply when adopting a child who is mentally and physically unable to care for him/herself. In these instances, adoptive parents may take the tax credit even if they did not pay any qualified adoption expenses.


While adoptive parents may claim both the tax credit and exclusion, they may not do so for the same expenses. Moreover, if adoptive parents receive a credit that is more than their tax, they may not get any additional amount as a refund. However, in these situations, taxpayers may carry forward any unused credits from the prior year to reduce their taxes in the following five years until they fully use the credit, whichever comes first.


About the Author: Joanie B. Stein, CPA, is a senior manager with Berkowitz Pollack Brant’s Tax Services practice. She can be reached in the firm’s Miami office at 305-379-7000 or via email at