Tax season is upon us — which means many of our adoptive families are wondering what the Adoption Tax Credit is and how it might benefit them. To help you out, we’ve gathered some basic information about the 2018 adoption tax credit below. Happy filing!

Adoption Tax Credit 101

Tax refund conceptual tax season tax preparation photography with files and tax forms in filing cabinet and words refund and taxes 2018 written on file folders with light bulb for ideas and US dollar cash in backgroundIf you have done any research into adoption financing, you’ve probably heard about the Federal Adoption Tax Credit. But what exactly is this credit, and how does it work?

The Federal Adoption Tax Credit is a non-refundable tax credit that helps families to offset the costs of qualifying adoption expenses. Families paid qualifying adoption expenses in 2018 and owe taxes may be eligible to benefit from this credit.

According to the IRS, “qualified adoption expenses” can include items like:

  • Adoption agency fees
  • Attorney fees
  • Court costs
  • Travel expenses related to the adoption
  • Re-adoption expenses in international adoptions

If you’re not sure whether you are eligible to use the adoption tax credit or if you paid qualifying adoption expenses in 2018, a tax professional will be able to provide more information.

How Much is the 2018 Adoption Tax Credit?

The amount families are eligible to receive from the Federal Adoption Tax Credit depends on a number of factors and will vary based on their unique situation. However, the maximum amount available for the 2018 Federal Adoption Tax Credit is $13,840.

The Adoption Tax Credit limit is based on modified adjusted gross income (MAGI) and is recalculated each year based on current cost of living. For the 2018 Adoption Tax Credit, the maximum amount available will begin to phase out for families with MAGI above $207,580 and will be unavailable to families with incomes around $247,580 or above.

For those concerned about the current government shutdown and how it may impact the process of filing taxes, the IRS has confirmed that tax returns will be processed as scheduled.

Adoption and taxes can be complicated, and you will likely have questions about the tax benefits available in your specific situation. While we hope you find the information in this post helpful, keep in mind that American Adoptions does not offer tax advice. Talk to a tax professional for more specific information about how the Adoption Tax Credit can benefit your family.