2017 Adoption Credit
For 2017, the Adoption Credit figures are $13,570 (Maximum credit), $203,540 (Phase-out threshold) and $243,540 (Fully phased out).
Effective 2017-01-01Source: Rev. Proc. 2016-55 (IRS)Verified 2026-09-02
Compared with 2016
| Item | 2016 | 2017 | Change |
|---|---|---|---|
| Maximum credit | $13,460 | $13,570 | +$110 (+0.8%) |
| Phase-out threshold | $201,920 | $203,540 | +$1,620 (+0.8%) |
| Fully phased out | $241,920 | $243,540 | +$1,620 (+0.7%) |
Who it applies to
Taxpayers who adopted a child in 2017 or are claiming the adoption credit for 2017
What changed this year, and why
For taxable years beginning in 2017, the maximum adoption credit is $13,570 per child. For a child with special needs the full amount is allowed; for other adoptions the credit equals qualified adoption expenses up to $13,570. The credit begins to phase out for taxpayers with modified adjusted gross income above $203,540 and is completely phased out at modified adjusted gross income of $243,540 or more.
Common questions
- Does the adoption credit phase out based on income?
- The credit phases out for taxpayers with modified adjusted gross income above $203,540 and is fully phased out at $243,540 or more.
- Is the maximum credit the same for a special-needs adoption as for other adoptions?
- Yes. For an adoption of a child with special needs, the full $13,570 credit is allowed regardless of actual expenses. For other adoptions, the credit is limited to qualified adoption expenses up to $13,570.
The credit shrinks as income rises
For 2017, the adoption credit starts to shrink once your modified adjusted gross income goes above $203,540. As your income rises between that threshold and the upper limit, the credit is reduced proportionally. Once your modified adjusted gross income reaches $243,540 or more, the credit is eliminated entirely - you cannot claim any adoption credit at all. Taxpayers with income at or below $203,540 can claim the full credit of up to $13,570 per eligible child without any reduction. The same phase-out range applies to the employer-provided adoption benefits exclusion, so both the credit and the exclusion are reduced and eliminated at the same income levels.
This amount begins to phase out if you have modified adjusted gross income in excess of $203,540 and is completely phased out for modified adjusted gross income of $243,540 or more.
2017 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
The credit and the employer exclusion cannot cover the same expense
You can claim both the adoption credit and the employer-provided adoption benefits exclusion for expenses of adopting an eligible child, but you cannot claim both a credit and an exclusion for the same expenses. This means you must divide your qualified adoption expenses between the two benefits: some expenses go toward the credit, and the remaining expenses go toward the exclusion. The total of both benefits for a single child in 2017 cannot exceed $13,570. For example, if your employer reimbursed you for part of your adoption costs and you exclude that reimbursement from your income, you cannot also count those same reimbursed expenses when calculating your adoption credit. You must allocate your expenses carefully so that no dollar of expense is used for both benefits.
But, you can't claim both a credit and exclusion for the same expenses.
2017 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
Unused credit carries forward
If the adoption credit you are allowed in 2017 is less than the total credit you calculated, you may have an unused credit that you can carry forward to the next 5 years or until it is fully used, whichever comes first. This situation arises when the credit is limited by your tax liability or by the income phase-out. To figure the exact amount of credit to carry forward to 2018, you must complete the Adoption Credit Carryforward Worksheet. If you do have any unused credit to carry forward, you should keep that worksheet because you will need it to calculate your credit for 2018. The carryforward rule ensures that taxpayers who cannot use the full $13,570 credit in one year due to limits still have the opportunity to benefit from the remaining credit in future tax years.
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.
2017 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 2017 Adoption Credit, your modified adjusted gross income (MAGI) may differ from the adjusted gross income (AGI) shown on your tax return. If you file Form 1040, your MAGI for the credit is your AGI (line 38) increased by certain amounts of income you otherwise excluded, such as income from Puerto Rico and amounts from Form 2555, Form 2555-EZ, or Form 4563 - forms used by taxpayers living abroad or in U.S. territories. In other words, MAGI adds back the income you were able to exclude because you live outside the United States or in one of its territories. This matters because the credit phases out between MAGI of $203,540 and $243,540. If your regular AGI is below the threshold but your MAGI (after adding back excluded foreign or territorial income) is $243,540 or more, you lose the credit entirely. Filers of Form 1040NR use the figure on line 37 without any additions.
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.
2017 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
Expenses paid before a domestic adoption is final wait a year
For a domestic adoption that is not yet final by the end of the year, expenses paid before the adoption becomes final cannot be claimed immediately. Instead, you must wait until the year after the year you made the payment. For example, if you paid qualifying adoption expenses in 2016 but the adoption did not become final until 2017, you claim those 2016 expenses on your 2017 tax return. This rule applies to all years before the adoption becomes final. However, once the adoption is final, expenses paid in the year of finality can be claimed in that same year, and expenses paid in any year after finality can be claimed in the year they were paid. This timing rule ensures that pre-finality expenses are deferred until the adoption is actually completed, while allowing you to claim expenses from the year before finality in the year the adoption becomes official. Employer-paid adoption benefits follow different timing rules and can be excluded in the year the employer pays them, regardless of when the adoption becomes final.
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.
2017 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
The form that claims it, and the order its parts are filled in
The 2017 Adoption Credit is claimed on Form 8839, and the form requires you to complete its sections in a specific order. Part III of the form must be filled out before you can calculate the credit in Part II. This sequencing matters because Part III determines whether employer-provided adoption benefits reimbursed your expenses, and those reimbursed amounts reduce the qualified expenses available for the credit. Without completing Part III first, you cannot accurately figure the credit amount. The form also includes Part I, where you report information about the eligible child. If you have a child with special needs, different rules may apply that affect how you complete the form. The income limit based on modified adjusted gross income is calculated later in the process, using information from your tax return and certain exclusions for income earned abroad or in U.S. territories.
For this reason, you must complete Form 8839, Part III, before you can figure the credit, if any, in Part II.
2017 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
What happens if the adoption falls through
If you paid qualified adoption expenses attempting to adopt a U.S. child and the adoption was unsuccessful, those expenses are not lost for credit purposes. Instead, you treat them the same way as expenses paid for adoptions that were not final by the end of the year. This means you can still claim the credit, but only after the waiting period applies - you claim the expenses in the year after you paid them. For example, if you paid expenses in 2016 and the adoption attempt failed, you claim those expenses on your 2017 return. If you paid additional expenses in 2017 during the same unsuccessful attempt, those 2017 expenses would be claimed in 2018, assuming the adoption never became final. This rule treats unsuccessful adoption attempts the same as ongoing adoption attempts that simply have not yet reached finality, allowing you to eventually claim the credit even though the adoption did not succeed. The maximum credit for 2017 is $13,570 per child, subject to the income phase-out that begins at modified adjusted gross income above $203,540 and eliminates the credit entirely at $243,540 or more.
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.
2017 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
Whether the credit is refundable, or only reduces what you owe
The 2017 adoption credit is nonrefundable. This means it can reduce your federal income tax liability to zero, but any portion of the credit that exceeds what you owe is not paid out to you as a refund. In other words, the credit is not a payment on its own; it can only offset tax you actually owe. Taxpayers figure the usable portion of the credit by completing the Credit Limit Worksheet in the Form 8839 instructions, which compares the tentative credit amount against the taxpayer's total tax liability. The tentative credit is subject to the phase-out that begins at $203,540 of modified adjusted gross income and eliminates the credit entirely at $243,540, with a maximum credit of $13,570 per eligible child before the phase-out applies. Because the credit is nonrefundable, even a taxpayer who qualifies for the full maximum will only benefit to the extent of their tax liability for the year.
Complete the credit limit worksheet to figure the limit of your nonrefundable adoption credit.
2017 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
What counts as a qualified adoption expense
For the 2017 Adoption Credit, a qualified adoption expense is any cost that is reasonable, necessary, and directly tied to the legal adoption of an eligible child. The IRS lists the following as qualifying items: adoption fees, attorney fees, court costs, travel expenses (including meals and lodging while away from home), and re-adoption expenses when adopting a foreign child. Not every cost related to an adoption qualifies, however. Expenses are excluded if you received funds from a state, local, or federal program for them; if they violate state or federal law; if they carry out a surrogate parenting arrangement; if they relate to the adoption of your spouse's child; if your employer reimbursed you for them; or if they are already claimed as a credit or deduction under another provision of federal income tax law. The credit itself can be worth up to $13,570 per eligible child in 2017, but the expenses you count toward that figure must meet all of these conditions.
Qualified adoption expenses are reasonable and necessary expenses directly related to, and for the principal purpose of, the legal adoption of an eligible child.
2017 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
Adopting your stepchild does not qualify for the credit
Under the 2017 federal Adoption Credit, you cannot claim the credit for expenses you paid to adopt your spouse's child - that is, a child who was already your spouse's before you married or whom your spouse adopted on their own before the marriage. The IRS treats this as a stepchild adoption, and the law excludes it from qualified adoption expenses. Only expenses for adopting a child who is not already your (or your spouse's) child can count toward the 2017 credit, which is worth up to $13,570 per eligible child. The credit also phases out for taxpayers with modified adjusted gross income between $203,540 and $243,540, and is fully unavailable above that upper figure. Even if you paid attorney fees, court costs, or other adoption-related costs in connection with your spouse's child, those amounts cannot be included on Form 8839 or used to figure the credit for the year.
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.
2017 Instructions for Form 8839, Qualified Adoption Expenses (IRS)
Who decides a child has special needs
For the 2017 Adoption Credit, only a state - including the District of Columbia - can decide that a child has special needs. The state must make three formal findings: that the child was a U.S. citizen or resident when the adoption effort began; that the child cannot or should not be returned to the birth parents' home; and that the child will not be adopted unless assistance is provided to the adoptive parents. States weigh factors such as the child's age, ethnic background, membership in a minority or sibling group, and any medical condition or physical, mental, or emotional handicap when making that last determination. A mere diagnosis or individual characteristic is not enough by itself - the state must formally conclude, on the record, that the child meets the special-needs definition. Adoptive parents should obtain the state's written determination before claiming the credit, because no doctor, social worker, or other professional can substitute for the state's finding. Without that official decision, the child does not qualify as having special needs for purposes of the 2017 credit, even if the child clearly has a condition that would seem to fit.
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.
2017 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. 2016-55 (IRS)
- Maximum credit
under § 23(b)(1) the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,570.
- 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 $203,540
- 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 $203,540 and is completely phased out for taxpayers with modified adjusted gross income of $243,540 or more.