The adoption credit is designed for families who adopted or started the adoption process. These taxpayers may be able to claim up to $14,080 of credit for each eligible child. To determine eligibility, taxpayers should fill out Form 8839, Qualified Adoption Expenses. This can help you determine how much credit you may be eligible for.
This credit may cover qualified expenses, including reasonable and necessary adoption fees, court costs and legal fees, adoption-related travel expenses, and other expenses directly related to the adoption. There are also income limits that could affect the amount of the credit.
The SECURE Act added an allowance for a $5,000 IRA withdrawal (without the usual 10% penalty) that can be used toward expenses related to childbirth or an adoption. This withdrawal counts as taxable income, though, and must be taken within a year of the child’s birth or arrival.
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov and CNBC.com[8][9]
[8] IRS.gov, March 10, 2020
[9] CNBC.com, October 22, 2020
