Form 8839 Adoption Credit and Exclusion: 2023 Filing Checklist
Purpose
Form 8839 allows taxpayers to claim a nonrefundable adoption credit and exclude employer-provided adoption benefits from gross income. For 2023, the maximum credit and exclusion per child is $15,950, reflecting the inflation adjustment for the tax year. The modified adjusted gross income (MAGI) threshold is $239,230, at which point the credit begins to phase out for incomes exceeding this amount. The phase-out range is $40,000, meaning the credit is completely phased out at a MAGI of $279,230 or more. This form applies to federal adoptions, special needs adoptions, and foreign adoptions meeting IRS requirements.
Who Can Claim
You may be able to take the adoption credit or exclusion if all of the following are true:
- Your filing status is single, head of household, qualifying surviving spouse, or married filing jointly
- Your modified adjusted gross income is less than $279,230, or you have a carryforward of an adoption credit from 2022
- You report the required information about the eligible child in Part I
The credit applies to eligible children, defined as any child under the age of 18 or any disabled individual who is physically or mentally unable to care for themselves.
Step-by-Step Filing Instructions
Step 1: Complete Part I for Each Eligible Child
Enter the child’s name and year of birth for each eligible child you adopted or tried to adopt. Check the appropriate boxes to indicate if the child was born before 2006 and is disabled, classified as a child with special needs, a foreign child, or if the adoption became final in 2023 or earlier. These designations determine eligibility for the full $15,950 credit and exclusion amount. Provide the child’s identifying number (SSN, ATIN, or ITIN) in column (f).
Step 2: Enter Maximum Credit Amount on Line 2
On line 2 of Part II, enter $15,950 as the maximum adoption credit per child for 2023. This is the inflation-adjusted amount specific to 2023. Do not use amounts from prior years. If you and another person (other than your spouse if filing jointly) each paid qualified adoption expenses to adopt the same child, the $15,950 limit must be divided between you.
Step 3: Report Prior Year Credit on Line 3
Complete line 3 to determine whether you filed Form 8839 in a prior year for the same child. If yes, enter the total of the amounts shown on lines 3 and 6 of the last Form 8839 you filed for the child. This carry-forward rule applies only when the same child is claimed across multiple tax years, preventing double claiming of the credit.
Step 4: Calculate Remaining Available Credit on Line 4
Subtract line 3 from line 2 and enter the result on line 4. This determines your remaining available credit for 2023 and ensures you do not exceed the lifetime maximum credit per child.
Step 5: Enter Qualified Adoption Expenses on Line 5
On line 5, enter qualified adoption expenses you paid in 2023, or in 2022 if the adoption was not final by the end of 2022. Qualified expenses include adoption fees, attorney fees, court costs, travel expenses while away from home, and re-adoption expenses for foreign children.
Expenses reimbursed by your employer under a qualified adoption assistance program must not be entered on line 5. For a U.S. child with special needs, where the adoption became final in 2023, enter $15,950 minus any qualified adoption expenses used to figure an adoption credit claimed for the same child in a prior year, even if you paid no expenses in 2023.
Step 6: Determine Smaller Amount on Line 6
Enter the smaller of line 4 or line 5 on line 6. This represents the adoption credit before applying any income phase-out.
Step 7: Calculate Modified Adjusted Gross Income on Line 7
Calculate line 7 using the MAGI worksheet in the 2023 instructions. Enter the amount from Form 1040, 1040-SR, or 1040-NR, line 11, increased by any exclusion of income from Puerto Rico, amounts from Form 2555, and amounts from Form 4563. This MAGI figure will be used to determine if the phase-out applies.
Step 8: Apply Phase-Out Calculation If Necessary
Compare your MAGI on line 7 to the 2023 threshold of $239,230. If your MAGI is $239,230 or less, the income limit will not affect your credit. If your MAGI is between $239,231 and $279,229, complete the phase-out calculation on lines 8 through 10 using the $40,000 divisor. If your MAGI is $279,230 or more, the credit is eliminated. The phase-out reduces your allowable credit proportionally based on the amount by which your income exceeds the threshold.
Step 9: Complete Credit Limit Worksheet for Line 15
Use the Credit Limit Worksheet in the 2023 instructions to figure the limit of your nonrefundable adoption credit. The credit cannot exceed your tax liability after certain other credits. Enter the result on line 15. This ensures the nonrefundable credit does not exceed the amount of tax you owe.
Step 10: Enter Final Adoption Credit on Line 16
On line 16, enter the smaller of line 14 or line 15. This is your allowable adoption credit for 2023. Transfer this amount to Schedule 3 (Form 1040), line 6c. Do not claim the credit on any other schedule or form. If line 15 is smaller than line 14, you may have a credit carryforward to future tax years.
Step 11: Complete Part III for Employer-Provided Adoption Benefits
Suppose you received employer-provided adoption benefits shown in box 12 of your 2023 Form W-2 with code T, complete Part III. Enter $15,950 on line 17 as the 2023 maximum exclusion per child. If you and another person (other than your spouse if filing jointly) each received employer-provided adoption benefits for the same child, the $15,950 limit must be divided between you.
Step 12: Report Prior Year Benefits on Line 18
If you received employer-provided adoption benefits in a prior year for the same child, enter on line 18 the total of the amounts shown on lines 18 and 22 of the last Form 8839 you filed for the child.
Step 13: Calculate Exclusion Amount
Subtract line 18 from line 17 and enter the result on line 19. On line 20, enter the total amount of employer-provided adoption benefits you received in 2023, as shown in box 12 of your Form W-2 with code T. Enter the smaller of line 19 or line 20 on line 22, unless special rules apply.
Step 14: Apply Special Needs Child Rule
If the child was classified as a child with special needs and the adoption became final in 2023, enter the amount from line 19 (not line 20) on line 22, regardless of the amount of employer benefits received. This special rule allows you to claim the full exclusion even if your employer did not pay the full amount in benefits.
Step 15: Apply Phase-Out to Exclusion and Determine Taxable Benefits
Calculate your MAGI on line 23 using the same method as line 7. The same MAGI threshold of $239,230 and phase-out range of $40,000 apply to the exclusion. Complete lines 24 through 28 to use the phase-out if your MAGI exceeds the threshold. Any employer-provided adoption benefits that cannot be excluded must be included in your income on Form 1040, 1040-SR, or 1040-NR, line 1f, and reported on line 29.
Key 2023 Updates
Maximum Amounts
The maximum adoption credit per child and employer-provided adoption benefit exclusion per child are both $15,950 for 2023. This is the inflation-adjusted amount specific to the 2023 tax year. Use this exact figure, and do not substitute amounts from 2022 or other years.
Income Thresholds
The MAGI threshold for the adoption credit and exclusion is $239,230 for 2023. The credit and exclusion begin to phase out when MAGI exceeds this threshold. The phase-out range is $40,000, meaning the credit and exclusion are eliminated at a MAGI of $279,230 or more.
Form Attachment
Form 8839 has attachment sequence number 38 and applies to 2023 returns filed with Form 1040, Form 1040-SR, or Form 1040-NR only. Do not attach to other return forms.
Foreign Adoption Rules
For foreign adoptions, you cannot take the adoption credit or exclusion unless the adoption becomes final. The timing of when expenses can be claimed depends on when the adoption became final. Special rules apply for non-Hague and Hague adoptions as detailed in Revenue Procedures 2005-31 and 2010-31.
Expense Timing
The IRS instructions emphasize the distinction between adoption expenses paid in 2022 (if the adoption was not final by the end of 2022) and expenses paid in 2023. Both may qualify for the 2023 credit, depending on when the adoption became final and whether the child is a U.S. citizen or a foreign national. Confirm the finality date against the child’s status and prior-year Form 8839 filings.
Important Definitions
Eligible Child
An eligible child is any child under age 18, or any disabled individual physically or mentally unable to care for themselves, regardless of age.
Child With Special Needs
A child is a child with special needs if all three of the following are true: the child was a U.S. citizen or resident when the adoption effort began, and a state determined that the child cannot or should not be returned to their parents’ home. The state determined that the child will not be adopted unless assistance is provided to the adoptive parents. The state must determine before the child is considered to have special needs.
Foreign Child
A child is a foreign child if they were not a citizen or resident of the United States or its territories when the adoption effort began.
Qualified Adoption Expenses
Qualified adoption expenses are reasonable and necessary expenses directly related to and for the principal purpose of the legal adoption of an eligible child. These include adoption fees, attorney fees, court costs, travel expenses (including meals and lodging while away from home), and re-adoption expenses related to the adoption of a foreign child.
Qualified adoption expenses do not include costs for which you received funds under any state, local, or federal program, expenses that violate state or federal law, expenses for carrying out a surrogate parenting arrangement, expenses for the adoption of your spouse’s child, expenses reimbursed by your employer, or expenses allowed as a credit or deduction under any other provision of federal income tax law.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
