What Form 8839 Is For
Form 8839 (2022) helps adoptive parents claim the adoption tax credit and exclude employer-provided adoption benefits from taxable income. This federal tax credit applies to qualified adoption expenses that meet the requirements of federal income tax law. The form provides financial relief for adoptive parents who incur reasonable and necessary expenses during the adoption process, including attorney fees, court costs, travel expenses, and adoption-related expenses associated with the legal adoption of an eligible child.
When You’d Use Form 8839
Taxpayers file Form 8839 when they pay qualified adoption expenses or receive employer-provided adoption assistance under a separate written plan set by their employer. You can file it during the tax year when your adoption effort began or once your legal adoption becomes final. Both the exclusion and the credit can be claimed for the same child as long as they are not based on the same expenses.
Key Rules or Details for 2022
- Maximum adoption credit: The maximum credit for 2022 is $14,890 per eligible child, providing substantial relief against your federal income tax liability.
- Income limits: The credit begins to phase out when your modified adjusted gross income exceeds $223,410 and is eliminated at $263,410 or higher.
- Qualified expenses: Qualified adoption expenses include adoption fees, travel expenses, legal fees, and court costs that are directly related to the adoption effort.
- Ineligible expenses: Expenses paid for surrogate parenting arrangements, violations of state or federal law, or adoption of a spouse’s child do not qualify.
- Special needs child: If you adopt a child with special needs as determined by a state agency, you may claim the full credit even without paid expenses.
- Employer-provided adoption assistance: Benefits under a qualified adoption assistance program may be excluded from taxable income if supported by a separate written plan.
- Carry forward and unused credit: Any unused credit can be applied to future years using the Adoption Credit Carryforward Worksheet.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Enter child and expense information
List each eligible child’s name, birth year, and identifying number, such as a Social Security Number, Adoption Taxpayer Identification Number, or Individual Taxpayer Identification Number.
Step 2: Report employer-provided adoption benefits
Include all adoption benefits received from your employer. Use the prior year benefits worksheet and credit limit worksheet to calculate income exclusion and avoid duplication of the same expenses.
Step 3: Calculate qualified adoption expenses
Combine all paid qualified adoption expenses, such as adoption fees, legal fees, and travel expenses. Include adoption expenses if you adopted an eligible foreign child.
Step 4: Apply income phaseout
Use your adjusted gross income to determine the portion of the credit allowed. The phaseout applies to higher-income adoptive parents whose taxable income exceeds IRS limits.
Step 5: Determine allowable credit amount
Subtract prior year credits from the maximum credit to find your total qualified adoption expenses eligible for this year’s adoption credit. If excess remains, record it on the Adoption Credit Carryforward Worksheet.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Claiming reimbursed expenses as a credit: Taxpayers sometimes claim adoption expenses that are already covered by employer-provided benefits. To avoid error, deduct reimbursed costs before calculating the credit.
- Failing to get a child’s identifying number: Missing the child’s identifying number causes processing delays. Apply early for an adoption taxpayer identification number to ensure timely filing.
- Including surrogate parenting arrangement costs: These are not qualifying adoption expenses. Keep receipts separate and record only reasonable and necessary expenses related to an eligible child.
- Misapplying phaseout rules: Many filers incorrectly calculate modified adjusted gross income. Use the correct limits to determine credit eligibility and avoid overclaiming.
- Not documenting special needs adoption: Some adoptive parents fail to provide proof that a child with special needs qualifies for full credit. Retain state determination letters and agency documentation.
- Overlapping credit and exclusion claims: Filing both the exclusion and the adoption credit for the same expenses can result in denial. Apply each benefit to distinct costs only.
- Ignoring carryforward credit rules: Failing to complete the adoption credit carryforward worksheet results in lost savings. Always include carry-forward details to apply unused credit correctly.
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 filing, the IRS reviews your adoption credit, income exclusion, and total qualified adoption expenses for accuracy. The agency verifies that employer-provided benefits match the reported W-2 information and checks the child identification numbers. If your adoption credit exceeds your tax liability, the remaining unused credit carries forward to future tax years under federal income tax law. Always keep documentation of adoption fees, receipts, and legal adoption records in case of an audit or review.
FAQs
Can I claim the adoption tax credit for adopting my spouse’s child?
You cannot claim the adoption tax credit for adopting your spouse’s child. Federal income tax law excludes these cases because they are not considered new legal adoptions under qualified adoption rules.
When can I claim the adoption credit for a child from another country?
You can claim the adoption credit for a foreign child only after the adoption becomes final. Paid expenses in previous years are then added to your total qualified adoption expenses for the finalization year.
What if my adoption expenses exceed my tax liability?
If your credit exceeds your federal income tax liability, the excess amount becomes an unused credit. You can carry it forward using the adoption credit carry-forward worksheet for up to five years.
How do the adoption benefits from my employer affect the credit?
Employer-provided adoption assistance can reduce your taxable income through income exclusion. However, do not claim both the exclusion and the adoption credit for the same expenses paid during the adoption effort.
What types of adoption expenses qualify for the credit?
Qualified expenses include attorney fees, court costs, travel expenses, and adoption fees. These must be reasonable and necessary expenses directly tied to completing a legal adoption of an eligible child.
How does adjusted gross income affect my credit?
Your adjusted gross income determines whether your credit amount is reduced under income limits. Higher-income adoptive parents may receive a smaller credit or be phased out entirely based on modified adjusted gross income thresholds.
Can I claim the credit for adopting a child with special needs?
Yes, if a state determines that a child cannot return to their parents' home without assistance due to factors such as age, the child’s ethnic background, or minority or sibling group status, you can claim the full credit.
