Is the Adoption Tax Credit a Full Refund or Just a Credit?

Tax breaks make adoption more affordable.

Baby and mother image by Kirill Zdorov from

The adoption tax credit helps offset the expenses of adopting a child. You can use this tax credit if you adopt a child from the United States or from a foreign country. You can claim the credit for expenses associated with a failed adoption if the child is from the United States. The IRS limits the amount you may deduct, so if your expenses were over this limit, they won’t be refunded. If you received credit from your employer to help pay adoption expenses, you can exclude these funds from your income for the year.

Refund or Credit

The adoption tax credit reduces your tax liability. The IRS will subtract any taxes you owe from your credit amount, and send you a check for the difference. If you owe $1,500 in taxes and your adoption tax credit is $11,500, you’ll get a check for $10,000. If you don’t owe any taxes, you’ll get a check for the full credit amount. If you’re entitled to a tax refund, you’ll get a check for the adoption credit plus your tax refund.

Qualified Expenses

Most expenses associated with adopting a child qualify. You can deduct legal fees, fees paid to adoption agencies and travel costs associated with adopting, including meals and lodging. The IRS says they must be “reasonable” but doesn’t define what that means. You can’t get credit for expenses associated with adopting your spouse’s child or for a surrogate child. You can’t get credit for any expenses someone else paid for or reimbursed you for, whether the reimbursement comes from your employer or a government program.


The IRS sets a limit on the amount of credit you can receive; in 2011 the amount was $13,360. You can claim up to this full amount, as long as your modified adjusted gross income is less than a certain amount; in 2011 this amount was $185,210. You can deduct part of the credit if your income falls between $185,210 and a maximum amount, which in 2011 was $225,210. If your income is more than this maximum, you can’t deduct the credit.

Income Exclusions

In addition to the credit to compensate you for your adoption expenses, you can exclude from your income money your employer gives you to help pay for an adoption. You can exclude up to the maximum credit amount -- $13,360 in 2011 -- and the same income limits apply for both the exclusion and the adoption credit. You can combine the exclusion and the credit, up to the allowable limit. So if your employer gave you $5,000 toward your adoption expenses and your total expenses were $12,000, you could exclude the $5,000 from your income and take a credit of $7,000.

Other Requirements

You must file a paper claim in order to take the adoption tax credit. Complete form 8839, Qualified Adoption Expenses, and attach this to your 1040. Depending on the type of adoption, you must include other documentation and receipts for expenses, such as the final adoption decree, home study paperwork, receipts for attorney’s fees and travel expenses, visas for a foreign adoption, and copies of any court orders associated with the adoption.