Claim a tax credit or exclusion for qualified adoption expenses with Form 8839

What is Form 8839?

You can use Form 8839 to report expenses related to adopting one or more children and claim the nonrefundable adoption tax credit. Whether you claim the credit or exclusion, the maximum amount for 2023 is $15,950 per eligible child, subject to a phaseout range.

You can claim this tax benefit for adopting a child under 18 (with a partial credit if the child turned 18 in the year of adoption), or a permanently disabled individual of any age if they can’t care for themselves.

The adoption tax credit is nonrefundable, which means that if there is any credit over your qualified expenses, you won’t be able to get a check or deposit for the rest of the credit. However, you can roll over any remaining adoption credit to future tax years once you’ve paid all your taxes for the year you first claimed the credit.

Phaseout ranges for the adoption credit

Regardless of your filing status, the phaseout range for the adoption credit or exclusion is the same. Taxpayers with modified adjusted gross income (MAGI) that is $279,230 or more cannot claim either benefit, while taxpayers with MAGI of $239,230 or less can claim the full amount of up to $15,950 per eligible child. MAGI between these amounts will reduce the amount of the benefit.

Married taxpayers generally need to file jointly to claim the credit or exclusion, but there are exceptions, such as:

• Legal separation
• One taxpayer providing more than half of the child’s support
• The eligible child living with one taxpayer for more than half of the year

Excluding employer-provided adoption benefits from income

Employer-provided adoption benefits will typically be reported on Form W-2, with code T in Box 12. If this amount is not reported on Form W-2, you can still take the exclusion if your employer helped with the costs through a qualified adoption assistance program and you finalized the adoption of a child with special needs in the same tax year.

If the adoption benefits do not cover all your adoption expenses, you claim the credit on the unreimbursed expenses. For example, suppose you spent $10,000 in eligible adoption expenses, and your employer's program reimburses $4,000. The maximum amount that you could use to compute the adoption credit would be $6,000, in Part II of Form 8839, while the exclusion would be worth only $4,000.

You must fill out Part III if you received any adoption benefits from your employer, regardless of whether they were reported on Form W-2, and even if you aren’t claiming the exclusion.

Qualified adoption expenses

Any reasonable and necessary expenses directly related to adopting an eligible child are eligible for the credit or exclusion. They include, but are not limited to:

• Fees paid to adoption agencies
• Legal and court costs
• Travel, meals, and lodging
• Re-adoption expenses, if adopting a foreign child

Expenses related to surrogate parenting arrangements or adopting your spouse’s child(ren) do not qualify. You can’t use expenses for this tax benefit that are allowed as a credit or deduction under any other federal tax provision, such as medical expense deductions.

Confused? We can help. A Jackson Hewitt Tax Pro can explain this form and help you fill it out, with any supporting documentation or calculations you may need. Taxes can be complicated, but you are not on your own. Contact us today.

About the Author

Mark Steber is Senior Vice President and Chief Tax Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.

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