What Form 8839 Is For
Form 8839 (2021) helps adoptive parents calculate and claim the adoption tax credit and exclusion for employer-provided adoption benefits under federal income tax law. The form enables taxpayers to report qualified adoption expenses, including agency fees, attorney fees, court fees, travel expenses, and other reasonable and necessary costs associated with the legal adoption of an eligible child. The federal adoption tax credit can reduce your tax liability and may carry forward for up to five years if unused.
When You’d Use Form 8839 2021
You should file Form 8839 with your tax return for the tax year when you paid qualified adoption expenses or finalized a domestic adoption or foreign adoption. If you discover additional qualified expenses after filing, you can submit an amended return to claim the remaining credit. The timing rules differ for foreign adoptions and domestic adoptions, so be sure to review the specific IRS instructions before filing.
Key Rules or Details for 2021
- Income phase-out range: The adoption credit and exclusion begin to phase out when adjusted gross income exceeds $216,660 and are completely phased out at $256,660 for the 2021 tax year.
- Eligible child definition: An eligible child is anyone under 18 or mentally unable to care for themselves, including an eligible foreign child if the adoption meets federal law.
- Qualified adoption expenses: These include agency fees, court costs, legal fees, and travel expenses directly related to the adoption process, as specified under state or federal law.
- Special Needs Adoption: For a child with special needs, adoptive parents may claim the full adoption tax credit, even without incurring expenses, if the adoption was finalized in 2021.
- Employer adoption assistance: You may exclude employer-paid direct benefits from income through a qualified adoption assistance program, but you cannot claim the same expenses for both the credit and exclusion.
- Carryforward rule: Any unused credit may be carried forward up to five years, allowing families with limited tax liability to benefit later still.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Collect supporting records
Gather receipts, legal fees, agency fees, and travel expenses showing paid expenses for the adoption effort. Keep all documents proving that your costs were reasonable and necessary expenses.
Step 2: Complete Part I for each adopted child
Enter details for every adopted child, including name, birth year, and adoption taxpayer identification number. Identify whether it was a foreign adoption or a domestic adoption.
Step 3: Report employer-provided adoption benefits
Suppose your employer paid qualified adoption expenses, complete Part III first. Determine how both the exclusion and credit apply, ensuring that the exact costs are not duplicated.
Step 4: Calculate qualified adoption expenses
List qualified expenses such as attorney fees, court costs, and re-adoption expenses for foreign child adoptions. Subtract any employer-paid reimbursements to avoid duplication.
Step 5: Apply the modified adjusted gross income phase-out
Use your modified adjusted gross income to check whether your adoption credit must be reduced or eliminated under the 2021 limits.
Step 6: Determine your allowable credit
Use the Credit Limit Worksheet in the instructions to find out how much of the maximum credit you can claim this year based on your taxable income and tax liability.
Step 7: Attach Form 8839 to your federal tax return
Include the calculated federal tax credit on Schedule 3, line 6c, of your Form 1040. Retain all records in case the IRS requests verification.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Missing identification numbers: Many filers omit or mistype a child’s SSN or adoption taxpayer identification number. To avoid rejection, apply for the correct number well in advance of filing.
- Double-claiming expenses: Taxpayers sometimes claim the same paid qualified adoption expenses for both the credit and exclusion. Prevent this by deducting all employer-paid reimbursements before making a claim.
- Incorrect timing for foreign adoptions: Some adoptive parents claim expenses too early. Wait until the foreign adoption is legally finalized before filing to ensure eligibility.
- Improperly combining adoption attempts: If you made multiple efforts to adopt the same child, include all adoption expenses on one line instead of separate entries to prevent confusion.
- Filing status errors: Couples filing separately are rarely eligible for this benefit. Always confirm your filing status before claiming the credit, as exceptions apply only under specific IRS rules.
- Unqualified expenses: Costs related to a surrogate parenting arrangement or that violate state or federal law do not qualify. Review the IRS list of qualifying expenses to avoid disqualification.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
After you submit Form 8839, the IRS reviews your adoption tax credit-related claim along with your overall tax return. Most electronic filings are processed within 21 days. If documentation is needed, you will receive a request for verification. Keep copies of all adoption assistance records, court costs, and proof that you paid expenses. Any unused credit carries forward up to five years, allowing partial or full credit usage in later years.
FAQs
Can I claim the adoption tax credit for my spouse’s child?
No, expenses for adopting your spouse's child are not considered qualified adoption expenses under federal law, so you cannot claim the credit in this situation.
What if I adopt more than one child in the same tax year?
If you adopt multiple children, you may claim separate credits for each eligible child. The maximum amount applies per child, subject to your adjusted gross income limits.
Can I claim the adoption credit for a child with special needs?
Yes, for a child with special needs, you may claim the full adoption tax credit, even if no expenses were paid, provided the adoption process was finalized in 2021.
What adoption expenses qualify under federal income tax law?
Qualified adoption expenses include agency fees, attorney fees, court costs, and travel expenses. Each must be a reasonable and necessary expense directly tied to a legal adoption.
Can I claim partial credit if my adoption effort began earlier?
Yes, if your adoption effort began in a prior year, you can claim partial credit in 2021 for paid expenses not previously claimed, depending on your filing status and income.
What happens if my adoption attempt fails?
For a domestic adoption, you may still qualify for the adoption credit based on expenses paid, even if the adoption was not completed. Foreign adoptions must be finalized before any credit is allowed.
Can an employer provide adoption assistance through a separate written plan?
Yes, employers can provide adoption assistance under a separate written plan that reimburses or directly pays qualified expenses. However, these reimbursements cannot be claimed again for the credit.
