2021 Adoption Credit
For 2021, the Adoption Credit figures are $14,440 (Maximum credit), $216,660 (Phase-out threshold) and $256,660 (Fully phased out).
Effective 2021-01-01Source: Rev. Proc. 2020-45 (IRS)Verified 2026-09-02
Compared with 2020
| Item | 2020 | 2021 | Change |
|---|---|---|---|
| Maximum credit | $14,300 | $14,440 | +$140 (+1.0%) |
| Phase-out threshold | $214,520 | $216,660 | +$2,140 (+1.0%) |
| Fully phased out | $254,520 | $256,660 | +$2,140 (+0.8%) |
Who it applies to
Taxpayers who paid qualified adoption expenses or who adopted a child with special needs and are claiming the credit under IRC § 23 for a taxable year beginning in 2021.
What changed this year, and why
For taxable years beginning in 2021, the IRS increased the maximum Adoption Credit to $14,440, up from $14,300 in 2020. The income phase-out range also shifted upward.
Common questions
- What is the maximum Adoption Credit for 2021?
- The maximum credit is $14,440 per eligible child. For an adoption of a child with special needs, the full $14,440 is allowed regardless of actual expenses. For other adoptions, the credit is limited to the amount of qualified adoption expenses, up to $14,440.
- At what income level does the Adoption Credit begin to phase out in 2021?
- The credit begins to phase out for taxpayers with modified adjusted gross income above $216,660.
- At what income level is the Adoption Credit fully phased out in 2021?
- The credit is completely phased out for taxpayers with modified adjusted gross income of $256,660 or more.
The credit shrinks as income rises
For 2021, the maximum adoption credit and the exclusion for employer-provided adoption benefits are each $14,440 per eligible child. However, these amounts do not remain at $14,440 for every taxpayer. If your modified adjusted gross income (MAGI) exceeds $216,660, the credit begins to phase out, meaning you will receive only a portion of the full amount. The reduction is gradual as income rises within the phase-out range. Once your MAGI reaches $256,660 or more, the credit is completely eliminated and you cannot claim any adoption credit or exclusion for that tax year. Taxpayers with MAGI of $216,660 or less are not affected by the phase-out and remain eligible for the full benefit. This income-based reduction applies to both the credit claimed on your return and any exclusion for employer-provided adoption benefits.
2021 maximum credit. The maximum credit and the exclusion for employer-provided benefits are both $14,440 per eligible child in 2021. This amount begins to phase out if you have modified adjusted gross income in excess of $216,660 and is completely phased out for modified adjusted gross income of $256,660 or more.
2021 Instructions for Form 8839 (IRS)
The credit and the employer exclusion cannot cover the same expense
Taxpayers who pay qualified adoption expenses and also receive adoption benefits through an employer's assistance program may be able to use both the adoption credit and the employer-provided exclusion in the same tax year. However, the IRS prohibits double-counting: the same dollar of expense cannot support both the credit and the exclusion. A taxpayer must allocate each expense to one benefit or the other. For example, if a taxpayer receives $14,440 in employer-provided adoption benefits that are excluded from income, those dollars are already accounted for and cannot also be counted toward the $14,440 adoption credit. Only expenses paid out-of-pocket, beyond what the employer reimbursed or excluded, may be used to calculate the credit. This rule prevents a taxpayer from receiving a double tax benefit on any single expense.
But, you can't claim both a credit and exclusion for the same expenses.
2021 Instructions for Form 8839 (IRS)
Unused credit carries forward
If the adoption credit a taxpayer is entitled to in 2021 exceeds the tax liability that the credit can offset in that year, the unused portion is not lost. The excess credit carries forward to future tax years. Specifically, an unused adoption credit can be carried forward for up to 5 years, or until it is fully used, whichever happens first. Each year the taxpayer must apply any remaining credit against that year's tax liability before moving on. The Adoption Credit Carryforward Worksheet is used to figure the exact amount available for carryforward. Taxpayers who carry any unused credit into 2022 must retain the worksheet because it is needed to compute the credit in the following year.
Line 16—Credit Carryforward to 2022 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.
2021 Instructions for Form 8839 (IRS)
MAGI for the credit adds back income excluded because you live abroad or in a territory
For most taxpayers, modified adjusted gross income (MAGI) starts with the adjusted gross income shown on Form 1040, 1040-SR, or 1040-NR, line 11. However, MAGI for the 2021 Adoption Credit is increased by the total of any exclusion of income from Puerto Rico, amounts from Form 2555 (lines 45 and 50), and the amount from Form 4563 (line 15). These add-backs apply to taxpayers who live abroad or in a U.S. territory and excluded certain income from their gross income. In 2021, if your MAGI is $216,660 or less, the income limit does not affect your credit. If your MAGI falls between that threshold and $256,660, the income limit reduces your credit or exclusion. If your MAGI is $256,660 or more, the income limit eliminates your credit or exclusion entirely.
Enter on line 7 the amount from Form 1040, 1040-SR, or 1040-NR, line 11, increased by the total of any: • Exclusion of income from Puerto Rico; • Amounts from Form 2555, lines 45 and 50; and • Amount from Form 4563, line 15.
2021 Instructions for Form 8839 (IRS)
Expenses paid before a domestic adoption is final wait a year
For a domestic adoption of a U.S. child, the year you claim qualifying expenses depends on when those expenses were paid relative to the finalization of the adoption. If you pay qualifying expenses in any year before the adoption becomes final, you cannot take the credit in that same year; instead, you must wait and claim the credit in the year after the year the payment was made. This rule delays the credit for pre-finalization expenses by one year. In contrast, expenses paid in the year the adoption becomes final are claimed in that same year, and expenses paid in any year after the adoption is final are also claimed in the year of payment. The 2021 maximum adoption credit is $14,440, subject to a phase-out for taxpayers with modified adjusted gross income between $216,660 and $256,660.
any year before the year the adoption becomes final* the year after the year of the payment.
2021 Instructions for Form 8839 (IRS)
The form that claims it, and the order its parts are filled in
To claim the 2021 Adoption Credit, you must complete Form 8839, Part III, before you can figure the credit, if any, in Part II. Part III determines whether any qualified adoption expenses were reimbursed by an employer under a written qualified adoption assistance program, because employer reimbursements reduce the expenses eligible for the credit. The form has three parts: Part I provides general information about the child and the adoption, Part II calculates the credit and exclusion amounts, and Part III reports employer-provided adoption benefits. You must work through Part III first to exclude any reimbursed amounts before calculating your credit in Part II. The only exception is if you adopted a child with special needs, in which case different rules may apply. The maximum credit for 2021 is $14,440 per eligible child.
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.
2021 Instructions for Form 8839 (IRS)
What happens if the adoption falls through
If you paid qualified adoption expenses in an attempt to adopt a U.S. child and the attempt was unsuccessful, you can still claim the credit. The IRS treats unsuccessful adoption expenses in the same manner as expenses paid for adoptions that were not final by the end of the year. For domestic adoptions of U.S. children, this means you can claim the credit even though the adoption never became final. The expenses follow the same timing rules as other domestic adoptions that aren't yet final. The maximum credit for 2021 is $14,440 per eligible child, and this amount is available regardless of whether the adoption was successful, as long as you paid qualified adoption expenses in the attempt.
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.
2021 Instructions for Form 8839 (IRS)
Whether the credit is refundable, or only reduces what you owe
For 2021, the federal adoption credit is a nonrefundable credit. That means the credit can reduce your federal income tax liability to zero, but any remaining credit is not paid out as a refund. If the credit is larger than the tax you owe for the year, the excess is not returned to you. The maximum adoption credit for 2021 is $14,440 per eligible child. However, you can only use the credit up to the amount of your tax liability for the year, as worked out on the credit limit worksheet in the instructions for Form 8839. The credit does not generate a refund on its own, and it cannot be carried back to a prior year. The credit is also subject to a phase-out based on modified adjusted gross income. For 2021, the phase-out begins at $216,660 and is complete at $256,660. If your income is above $256,660, you are not eligible for any adoption credit for the year. If your income falls within the phase-out range, the available credit is reduced proportionally.
Complete the credit limit worksheet to figure the limit of your nonrefundable adoption credit.
2021 Instructions for Form 8839 (IRS)
What counts as a qualified adoption expense
Under the 2021 Adoption Credit, a qualified adoption expense is a cost that is reasonable, necessary, and directly tied to the legal adoption of an eligible child. The expense must have the principal purpose of completing that adoption. The IRS lists specific categories that qualify: adoption fees, attorney fees, court costs, travel expenses (including meals and lodging) incurred while away from home, and re-adoption expenses for a foreign child. Expenses that do not qualify include costs reimbursed by an employer or covered by a state, local, or federal program; expenses that violate state or federal law; costs related to a surrogate parenting arrangement; expenses for adopting a spouse's child; and amounts already claimed as a credit or deduction elsewhere under federal income tax law. This definition sets the boundaries for what taxpayers may count when claiming the Adoption Credit, which for 2021 is capped at $14,440 per eligible child.
Qualified adoption expenses are reasonable and necessary expenses directly related to, and for the principal purpose of, the legal adoption of an eligible child.
2021 Instructions for Form 8839 (IRS)
Adopting your stepchild does not qualify for the credit
Expenses you pay to adopt your spouse's child do not count as qualified adoption expenses, so they cannot be used to figure the 2021 Adoption Credit in the United States. The credit is otherwise worth up to $14,440 per eligible child for the year, but a stepchild adoption is specifically excluded. This exclusion applies regardless of whether you paid agency fees, court costs, travel expenses, or any other amount toward the adoption. The rule reflects the IRS position that a spouse's child is already your family member for credit purposes, so the expenses are not treated as adoption costs eligible for the benefit. For 2021, the credit begins to phase out for taxpayers with modified adjusted gross income above $216,660 and is fully phased out at $256,660, but even those well within the income range cannot claim the credit for a stepchild adoption.
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.
2021 Instructions for Form 8839 (IRS)
Who decides a child has special needs
For the 2021 Adoption Credit, a child is classified as having special needs only if a state - including the District of Columbia - formally determines three things: the child was a U.S. citizen or resident when the adoption effort began, the child cannot or should not be returned to the parents' home, and the child will not be adopted unless assistance is given to the adoptive parents. States consider factors such as the child's age, ethnic background, membership in a minority or sibling group, and any medical, physical, mental, or emotional condition. The state itself makes the determination; a child's having a particular condition or factor alone is not enough to qualify. This determination must be made before the child is considered to be a child with special needs for purposes of the credit, which can be as much as $14,440.
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. The state must make a determination that a child has special needs before the child is considered to be a child with special needs. A child having a specific factor or condition isn't enough to establish that the state has made a determination of special needs.
2021 Instructions for Form 8839 (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. 2020-45 (IRS)
- Maximum credit
under § 23(b)(1) the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $14,440.
- 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 $216,660
- Fully phased out
under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $216,660 and is completely phased out for taxpayers with modified adjusted gross income of $256,660 or more.