2016 Adoption Credit
For 2016, the Adoption Credit figures are $13,460 (Maximum credit), $201,920 (Phase-out threshold) and $241,920 (Fully phased out).
Effective 2016-01-01Source: Rev. Proc. 2015-53 (IRS)Verified 2026-09-02
Who it applies to
Taxpayers who paid qualified adoption expenses or adopted a child with special needs in taxable years beginning in 2016.
What changed this year, and why
The IRS published the 2016 inflation-adjusted amounts for the Adoption Credit under Internal Revenue Code § 23.
Common questions
- What is the maximum adoption credit for 2016?
- For 2016, the maximum adoption credit is $13,460 per child. For adoptions of children with special needs, the full $13,460 is allowed regardless of actual expenses. For other adoptions, the credit is limited to the amount of qualified adoption expenses, up to $13,460.
- Does the adoption credit phase out based on income?
- For 2016, the adoption credit begins to phase out when modified adjusted gross income exceeds $201,920 and is completely phased out at $241,920 or more.
The credit shrinks as income rises
The 2016 adoption credit of $13,460 per eligible child does not remain available to all taxpayers regardless of income. The credit begins to phase out if you have modified adjusted gross income in excess of $201,920 and is completely phased out for modified adjusted gross income of $241,920 or more. This means taxpayers with MAGI at or below $201,920 can claim the full credit, while those with income between the threshold and the complete phase-out point receive a reduced credit amount. Taxpayers with MAGI of $241,920 or more cannot claim any adoption credit for that tax year. The phase-out applies separately to the employer-provided adoption benefits exclusion, using the same income thresholds.
The maximum credit and the exclusion for employer-provided benefits are both $13,460 per eligible child in 2016. This amount begins to phase out if you have modified adjusted gross income in excess of $201,920 and is completely phased out for modified adjusted gross income of $241,920 or more.
2016 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
The credit and the employer exclusion cannot cover the same expense
Taxpayers can claim both the adoption credit and the exclusion for employer-provided adoption benefits in the same tax year, but they cannot apply both benefits to the same qualified adoption expenses. This means you must allocate your expenses between the two benefits. For example, if you have qualified adoption expenses and your employer provided adoption benefits, you could potentially exclude up to $13,460 from your income and also claim a credit of up to $13,460. However, the same dollar of expense cannot count toward both the credit and the exclusion. You must decide which expenses to apply to the exclusion and which to apply to the credit. This allocation rule prevents double-dipping and ensures that the total tax benefit does not exceed the actual qualified expenses incurred.
You can claim both the exclusion and the credit for expenses of adopting an eligible child. For example, depending on the cost of the adoption, you may be able to exclude up to $13,460 from your income and also be able to claim a credit of up to $13,460. But, you can't claim both a credit and exclusion for the same expenses.
2016 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
Unused credit carries forward
If your adoption credit for 2016 exceeds your tax liability, you may have an unused portion that can be carried forward to future tax years. The IRS allows you to carry forward the unused credit to the next 5 years or until it is fully used, whichever comes first. To determine the amount available for carryforward, you must complete the Adoption Credit Carryforward Worksheet provided in the instructions. If you have any unused credit to carry forward to 2017, you should keep this worksheet because you will need it to figure your credit for that year. This carryforward provision ensures that taxpayers who cannot use their full $13,460 credit in 2016 due to insufficient tax liability have the opportunity to benefit from the credit in subsequent years when their tax situation may be more favorable.
If Form 8839, line 15 is smaller than line 14, you may have an unused credit to carry forward to the next 5 years or until used, whichever comes first.
2016 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
MAGI for the credit adds back income excluded because you live abroad or in a territory
For the 2016 Adoption Credit, your modified adjusted gross income (MAGI) is generally the same as the adjusted gross income shown on your federal tax return, but with one key addition. If you live abroad or in a U.S. territory and excluded certain income from your return, that excluded income must be added back when calculating MAGI for the credit. Specifically, for filers using Form 1040, the MAGI entered on line 7 of Form 8839 is the amount from line 38 of Form 1040, increased by the total of any exclusion of income from Puerto Rico and amounts from Form 2555 (lines 45 and 50), Form 2555-EZ (line 18), and Form 4563 (line 15). For filers using Form 1040NR, the MAGI is simply the amount from line 37 of that form. This adjustment ensures that income you were able to exclude from your regular tax return due to foreign or territorial residency is still counted when determining whether you qualify for the credit or how much credit you can claim based on the income limits.
Form 1040 Form 1040, line 38, increased by the total of any: Exclusion of income from Puerto Rico and Amounts from– Form 2555, lines 45 and 50, Form 2555-EZ, line 18, and Form 4563, line 15.
2016 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
Expenses paid before a domestic adoption is final wait a year
For a domestic adoption of a U.S. child, expenses paid in any year before the year the adoption becomes final cannot be claimed right away. Instead, the credit for those expenses is taken in the year after the year of the payment. This one-year delay applies only to pre-finalization expenses. If you pay qualifying expenses in the year the adoption becomes final, or in any year after it becomes final, you claim the credit in the year you pay them. Employer-paid expenses under an adoption assistance program are handled separately and are taken as an exclusion in the year of payment. The maximum credit for 2016 is $13,460 per child, and the credit phases out for taxpayers with modified adjusted gross income between $201,920 and $241,920.
Domestic Adoption IF you pay qualifying expenses in... THEN take the credit in... Any year before the year the adoption becomes final* The year after the year of the payment. The year the adoption becomes final The year the adoption becomes final. Any year after the year the adoption becomes final The year of the payment.
2016 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
The form that claims it, and the order its parts are filled in
Form 8839 has two main parts for 2016: Part II figures the adoption credit, and Part III figures the exclusion for employer-provided adoption benefits. Qualified adoption expenses for the credit do not include amounts reimbursed by an employer under a written qualified adoption assistance program. Because of this, Part III must be completed first to determine which expenses were reimbursed and which remain eligible for the credit in Part II. Without finishing Part III, you cannot accurately calculate the credit amount in Part II. There is an exception for children with special needs, who may qualify under different rules. The maximum credit for 2016 is $13,460 per child, and it phases out for taxpayers with modified adjusted gross income between $201,920 and $241,920.
For purposes of calculating the adoption credit in Part II, qualified adoption expenses don't include expenses reimbursed by an employer under a written qualified adoption assistance program (see Employer-Provided Adoption Benefits). For this reason, you must complete Form 8839, Part III, before you can figure the credit, if any, in Part II.
2016 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
What happens if the adoption falls through
If you pay qualified adoption expenses trying to adopt a U.S. child and the adoption does not go through, those expenses are not lost. The IRS treats them the same way as expenses paid for a domestic adoption that has not yet become final. That means you claim them in the year after the year you paid them. For example, if you paid $3,000 in 2015 for an unsuccessful attempt and another $2,000 in 2016 before the attempt failed, you claim the $3,000 on your 2016 return (the year after you paid it) and the $2,000 may qualify on your 2017 return. This rule applies only to attempts to adopt a U.S. child; foreign adoption expenses that do not result in a completed adoption cannot be claimed until the year the adoption becomes final. The maximum credit in 2016 is $13,460 per eligible child, and the credit phases out between modified adjusted gross income of $201,920 and $241,920.
Unsuccessful adoption. If you paid qualified adoption expenses in an attempt to adopt a U.S. child and the attempt was unsuccessful, treat those expenses in the same manner as expenses you paid for adoptions not final by the end of the year. Example. You paid $3,000 of qualified adoption expenses in 2015 in an attempt to adopt a U.S. child. You paid $2,000 in qualified adoption expenses early in 2016. However, the adoption attempt was unsuccessful. Enter $3,000 on line 5. The $2,000 paid in 2016 may qualify in 2017.
2016 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
Whether the credit is refundable, or only reduces what you owe
The 2016 adoption credit is nonrefundable: it can reduce your federal income tax to zero, but it does not create a refund by itself. Form 8839's Credit Limit Worksheet, at Line 15, compares the credit you have earned against your tax liability and limits what you can actually use for 2016 to whichever amount is smaller. The maximum credit for 2016 is $13,460 per eligible child, and it phases out for taxpayers with modified adjusted gross income between $201,920 and $241,920. Because the credit only offsets tax you owe, how much of it you can use in 2016 depends on your tax liability that year.
Complete the credit limit worksheet to figure the limit of your nonrefundable adoption credit.
2016 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
What counts as a qualified adoption expense
For the 2016 Adoption Credit, an expense must satisfy a three-part test: it must be reasonable and necessary, it must be directly related to the legal adoption of an eligible child, and that adoption must be its principal purpose. Expenses that clear this test include adoption fees, attorney fees, court costs, travel expenses such as meals and lodging while away from home, and re-adoption expenses for a foreign child. The IRS also carves out several categories that never qualify, even if they otherwise look like ordinary adoption costs: expenses reimbursed by an employer or paid through a state, local, or federal program; expenses that violate state or federal law; costs of a surrogate parenting arrangement; amounts spent adopting a spouse's child; and any expense already allowed as a credit or deduction elsewhere under federal income tax law. In short, a cost is "qualified" only after it survives every one of these exclusions, and only then can it count toward the credit - up to the $13,460 maximum - for the tax year in which it was paid.
Qualified adoption expenses are reasonable and necessary expenses directly related to, and for the principal purpose of, the legal adoption of an eligible child. Qualified adoption expenses include: Adoption fees, Attorney fees, Court costs, Travel expenses (including meals and lodging) while away from home, and Re-adoption expenses relating to the adoption of a foreign child. Qualified adoption expenses don't include expenses: For which you received funds under any state, local, or federal program, That violate state or federal law, For carrying out a surrogate parenting arrangement, For the adoption of your spouse's child, Reimbursed by your employer or otherwise, or Allowed as a credit or deduction under any other provision of federal income tax law.
2016 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
Adopting your stepchild does not qualify for the credit
The IRS says that the Adoption Credit cannot be claimed for the adoption of a spouse's child - that is, a stepchild. Even if you pay qualified adoption expenses such as attorney fees, court costs, or travel expenses in connection with adopting your spouse's child, those expenses are excluded by law and do not count toward the 2016 credit, which otherwise can reach $13,460 per eligible child. The same exclusion also applies to expenses reimbursed by an employer or another program, expenses that violate state or federal law, and expenses connected with a surrogate-parenting arrangement. For a taxpayer in 2016, the credit also phases out for higher incomes, beginning when modified adjusted gross income exceeds $201,920 and disappearing entirely at $241,920. If you are already married and want to help provide for your spouse's child, other tax benefits may be available - such as claiming the child as a dependent - but the Adoption Credit itself is off the table for that situation.
Qualified adoption expenses don't include expenses: For which you received funds under any state, local, or federal program, That violate state or federal law, For carrying out a surrogate parenting arrangement, For the adoption of your spouse's child, Reimbursed by your employer or otherwise, or Allowed as a credit or deduction under any other provision of federal income tax law.
2016 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
Who decides a child has special needs
For the 2016 Adoption Credit, a child qualifies as having special needs only if a state - including the District of Columbia - formally determines that the child has special needs. Specifically, the state must find three things: the child is a U.S. citizen or resident who cannot or should not be returned to the parents' home, and the child will not be adopted unless assistance is provided to the adoptive parents. States look at factors such as the child's age, ethnic background, whether the child is part of a minority or sibling group, and whether the child has a medical condition or a physical, mental, or emotional handicap. A child merely having one of these characteristics is not enough on its own; the state must make an explicit special-needs determination before the child is considered a child with special needs for purposes of the 2016 credit, which can be worth up to $13,460. This state determination is what allows an adoptive parent to claim the full credit even without paying any qualified adoption expenses.
3. The state has determined that the child won't be adopted unless assistance is provided to the adoptive parents. Factors used by states to make this determination include: a. The child's ethnic background and age, b. Whether the child is a member of a minority or sibling group, and c. Whether the child has a medical condition or a physical, mental, or emotional handicap.
2016 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Rev. Proc. 2015-53 (IRS)
- Maximum credit
under § 23(b)(1) the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,460.
- Phase-out threshold
The available adoption credit begins to phase out under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $201,920
- Fully phased out
The available adoption credit begins to phase out under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $201,920 and is completely phased out for taxpayers with modified adjusted gross income of $241,920 or more.