Adoption is one of the most important decisions all parties involved can make. Depending on the circumstances, it offers many benefits for the biological parents and adoptive parents seeking to uphold the best interests of children.
At the same time, this family law matter comes with its share of financial obligations. If you’re considering adoption or have already filed an adoption petition, you may be asking, “Is the adoption credit tax refundable?”
This blog, from a Raleigh adoption attorney, explains the adoption tax credit, who qualifies, and how you can claim it. It helps prospective adoptive parents understand their financial options as they move through the legal process.
Are you seeking help with adoption in North Carolina?
Our skilled Raleigh adoption attorney at Mills Adoption Law has been guiding clients through the legal requirements for over 35 years. Keep reading to learn more, then contact us at (919) 306-2899 to schedule a free, 15-minute consultation.
What Is the Adoption Tax Credit?
The federal Adoption Tax Credit offsets the costs associated with adopting a child. It includes expenses such as agency fees, court costs, travel expenses, and more. For 2024, if you adopt an eligible child, you can claim the adoption credit on your federal income taxes for up to $16,810. If your employer provides adoption credits, you can also exclude up to $16,810 of them from your income. Keep in mind that this is a credit, not a direct payment or refund.
The adoption tax credit is non-refundable, meaning it can only reduce your tax liability to zero. If your tax liability is less than the credit amount, you won’t receive the remaining balance as a refund. That said, unused portions of the credit can carry forward for up to five years, providing relief for families over time.
While the federal credit is a tremendous benefit, North Carolina does not currently offer a state-level adoption tax credit, which means adoptive parents in North Carolina can only utilize the federal credit. Consult a knowledgeable adoption attorney to understand what it means for your specific circumstances.
Who Is Eligible for the Adoption Tax Credit?
As a Raleigh adoption attorney knows, not every adoptive parent or adoption situation qualifies for the tax credit. To see if you qualify, consider the following eligibility criteria:
Qualified Adoption Expenses
The IRS considers many types of adoption-related expenses as “qualified.” These include:
- Court costs
- Attorney fees
- Adoption agency fees
- Travel expenses including meals and lodging
- Other expenses directly for the legal adoption
- Expenses paid before an eligible child has been identified, such as a home study
Non-Qualified Costs
- Those covered by an employer
- Funds received from grants
- Any expenses related to surrogate parenting
- Adopting your spouse’s child
Income Limits
The adoption tax credit begins to phase out for families with modified adjusted gross incomes (MAGI) higher than $252,150. The credit is reduced The credit is reduced for incomes between $252,151 and $292,150 and unavailable if your income exceeds $292,150.
If your income falls within these limits, it’s worth exploring your options with a law firm that focuses on adoption to maximize your financial benefits.
Type of Adoption
The adoption credit applies to domestic, international, and foster care adoptions. Even failed adoptions may qualify for the credit under certain conditions. However, stepparent adoptions are not eligible, which is something to keep in mind if you’re formalizing an existing parent-child relationship.
How to Claim the Adoption Tax Credit
Claiming the adoption credit may seem intimidating, but it’s straightforward if you follow these steps:
1. Keep Detailed Records
From the moment you begin the adoption process, save every receipt and document related to expenses, including payments made to a North Carolina adoption law attorney, potential travel expenses, and any fees charged by the agency or court. Good record-keeping will make filing your taxes much easier.
2. Use IRS Form 8839
You’ll need to fill out Form 8839, “Qualified Adoption Expenses,” when filing your taxes. This form helps you calculate your credit amount and report your adoption expenses.
3. File Your Taxes
Once you’ve completed Form 8839, attach it to your federal income tax return. Confirm the accuracy of all information and include supporting documentation if required.
If you’re unsure about any part of the process, working with a North Carolina attorney can make all the difference. At Mills Adoption Law, we walk you through the legal aspects of adoption and help you understand financial resources like the adoption tax credit.
Common Misconceptions About the Adoption Tax Credit
There’s some confusion about how the adoption tax credit works, especially among first-time adoptive parents. Here are the most common misconceptions:
1. “You’ll get a refund for the entire credit amount.”
As we mentioned, the adoption tax credit is non-refundable. While it can eliminate your tax liability, any remaining credit won’t be sent to you as a refund. However, the unused portion can carry over for up to five years.
While the credit is substantial, it may not cover everything. Some costs, such as those paid for with employer assistance or grants, are excluded. Additionally, expenses related to stepparent adoptions or surrogate parenting do not qualify.
3. “It’s only for certain types of families.”
The adoption tax credit is available to all adoptive families, regardless of marital status. Whether you’re adopting as a single individual or as a couple, you may qualify. This is just one reason why speaking with experienced attorneys for adoption can help you understand your options.
4. “It applies to future expenses.”
The tax credit only applies to expenses that have already been incurred. A North Carolina attorney can help you track and document these costs to determine eligibility.
How the Adoption Tax Credit Benefits Adoptive Families
For many, the financial aspect of adoption can be prohibitive. The adoption tax credit provides the relief prospective parents need to focus on what truly matters—building their family and providing a loving home for their child. By recouping up to $16,810 of qualified expenses, the process may be less financially restrictive for you, enabling you to welcome a new family member into your life.
For individuals in North Carolina considering interstate or international adoption—which often comes with higher costs—the credit can make a significant impact. Even though the credit is non-refundable, it still offers significant savings for those with a tax liability.
Mills Adoption Law: Experience for What Matters Most — Family
Embarking on the adoption process, a deeply personal and rewarding path, is not without its challenges. A family law attorney who focuses on adoption recognizes that the adoption tax credit is just one aspect of facilitating a smooth adoption process — whether it’s an independent adoption or any other type.
Have you been typing “adoption lawyers near me,” “adoption law attorney,” or “attorneys for adoption” into your search bar?
At Mills Adoption Law, we focus on what matters most—family. Bobby Mills, founding attorney of Mills Adoption Law, has over 35 years of hands-on experience. Having represented all members of the adoption triad—adoptive parents, birth parents, and adoptees—he has seen things and can anticipate problems other attorneys will not anticipate. Through his work on thousands of cases, he truly understands how to navigate the legal system and stand up for families. Contact his family law firm at (919) 306-2899 or complete our online form to book a free, 15-minute consultation.
Copyright © 2025. Mills Adoption Law. All rights reserved.
The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.
Mills Adoption Law
4600 Marriott Dr, Ste 350
Raleigh, NC 27612
(919) 306-2899
https://www.millsadoptionlaw.com/