Simplifying A Complex Process

What you need to know about the adoption tax credit

On Behalf of | Aug 3, 2023 | Adoption

The federal adoption tax credit is one of the ways Michigan families handle the many fees associated with becoming a family. It’s important to understand the many areas where the tax credit can and cannot apply.

The credit for 2022

The federal adoption credit for adoptions finalized in 2022 is up to $14,890 per adopted child. Taxpayers must have federal income tax liability in order to apply for the tax credit when they file their tax return.


The adopted child cannot be a stepchild. The adoption credit only applies when adopting children under the age of 18 or if they are physically or mentally unable to care for themselves.

Parents must meet the modified adjusted gross income limits. Families with an income below $223,410 can apply to claim the full tax credit. Families that earn between $223,410 and $263,410 can apply to claim a partial tax credit. Families with incomes over $263,410 are not eligible to apply for the adoption tax credit.

This tax credit applies toward expenses in most adoptions. This doesn’t necessarily mean you’ll receive the benefits, but you can apply to receive them to cover expenses.

The tax credit can apply in full when parents finalize the adoption of a child with special needs. In this case, it doesn’t matter what the adoption expenses were.

Special needs

The term special needs has many implications that don’t necessarily apply. A special needs adoption is typically a child from the United States foster care system. Typically families that receive adoption assistance program benefits or adoption subsidies, like Medicaid, will qualify as having finalized a special needs adoption.

For adoption to qualify as special needs, the child needs to be a United States resident at the time of the adoption. During the adoption or foster care process, the state decided adoption was unlikely to happen without the assistance provided to the future adoptive parents. This applies to many of the children in the foster care system, but not all of them.


Parents who’ve adopted a child that isn’t a stepchild and isn’t a special needs adoption can apply the tax credit to adoption-related expenses. Qualifying expenses may include legal and travel fees that were necessary in order to complete the adoption process. Adoption agency fees are another qualifying expense. There is no guarantee that the entire tax credit will apply. This is one situation where a financial advisor may help organize your expenses and tax paperwork.