What Form 8839 (2024) Is For
Form 8839 (2024) helps taxpayers calculate the federal adoption tax credit and the income exclusion for employer-provided adoption benefits. It allows adoptive parents to report qualified adoption expenses, which include reasonable and necessary expenses such as court costs, attorney fees, and travel expenses. Adoptive parents must file this IRS form when they have paid qualified adoption expenses during the tax year for an eligible child, whether through a domestic adoption or a foreign child adoption process.
When You’d Use Form 8839 (2024)
You would file Form 8839 when you paid expenses related to an adoption effort during the year or received employer-provided benefits through a qualified adoption assistance program. This includes both domestic and international adoptions of an eligible child. If you missed claiming the adoption credit in prior years, you may still file an amended tax return to claim the credit. Married adoptive parents generally must file jointly to qualify for the federal tax credit and income exclusion.
Key Rules or Details for 2024
- Maximum Adoption Credit: The maximum adoption tax credit for 2024 is $16,810 per child. This maximum credit also applies to employer-paid benefits excluded from taxable income.
- Income Limits: The adoption credit begins to phase out once modified adjusted gross income exceeds $252,150 and phases out entirely at $292,150.
- Qualified Adoption Expenses: These include reasonable and necessary expenses, such as adoption fees, attorney fees, court costs, and travel expenses directly related to the legal adoption process.
- Nonqualifying Expenses: Costs related to adopting a spouse's child, surrogate arrangements, or reimbursed amounts are not eligible for claim as qualified expenses.
- Special Needs Adoptions: Adoptive parents of a minority or sibling group determined by a state agency as having special needs can claim the full credit, even with little or no expenses paid.
- Domestic vs. Foreign Adoptions: For domestic adoption, you can claim partial credit for expenses paid before finalization. For a foreign child, you can only claim the credit once the adoption becomes final.
- Carryforward of Unused Credit: If your tax liability is lower than your credit, the Adoption Credit Carryforward Worksheet helps track unused amounts for up to five years.
- Employer Provided Benefits: If you receive benefits through a qualified adoption assistance program, complete the prior year benefits worksheet and reduce the same expenses when claiming the credit.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Provide the child with information
Enter each child’s identifying number, such as a Social Security Number, Adoption Taxpayer Identification Number, or Individual Taxpayer Identification Number. Include the child’s name, birth year, and whether they are a U.S. citizen or an eligible foreign child.
Step 2: Report employer-provided benefits
If your employer provides adoption assistance, report it in Part III. Use your W-2 to find the employer-provided benefits in Box 12 (Code T). Enter these details to calculate the income exclusion and ensure the same expenses are not claimed again.
Step 3: Calculate your qualified expenses
List total qualified adoption expenses, including attorney fees, court costs, and other reasonable and necessary expenses. Subtract any employer-paid benefits or prior year reimbursements, and use the credit limit worksheet to determine your maximum adoption credit.
Step 4: Claim the credit on your return
Transfer the result to Schedule 3 of your tax return to claim the adoption credit. If you received employer benefits, reduce your taxable income by the amount of the exclusion. The adoption credit can lower your federal income tax liability, but it cannot exceed your total tax bill.
Step 5: Keep documentation
Keep records of all expenses paid, including receipts, legal adoption decrees, and documentation of adoption efforts. You may need these if the IRS requests verification of your adoption process or qualified expenses.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Double-Claiming the Same Expenses: Some adoptive parents claim both the exclusion and the adoption credit for the same expenses. To avoid this, complete the section for employer-provided benefits before calculating your credit.
- Incorrect Filing Status: Filing separately when married usually disqualifies the taxpayer from claiming the adoption credit. To avoid this, file jointly unless you meet IRS exceptions for separate filing.
- Premature Foreign Adoption Claims: Claiming the credit before a foreign child’s adoption is final can cause denial. Wait until the legal adoption is finalized to claim total qualified adoption expenses.
- Missing Documentation for Special Needs: Failing to provide documentation for a child with special needs can result in delayed or denied credit. Always include a state determination letter showing eligibility for full credit.
- Forgetting Carryforward Credits: Unused credits can be carried forward for up to five years. Use the adoption credit carry-forward worksheet each tax year to report and track any remaining credit.
- Failing to Report Employer Benefits: Some taxpayers overlook the requirement to report employer-provided benefits. Always include them on your tax return and use the prior year benefits worksheet when applicable.
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 file Form 8839, the IRS processes your return like any other federal tax credit. Electronic filing generally results in processing within three weeks, while paper filings can take several weeks longer. The credit can only reduce your federal income tax liability; it will not produce a refund if your liability is zero.
The IRS may request proof of adoption expenses; therefore, it is essential to maintain all relevant records related to these expenses. If you carry unused credits forward, report them accurately in future tax years.
FAQs
How does the adoption tax credit reduce my federal income tax liability?
The adoption tax credit lowers the amount of federal income tax you owe. It can reduce your liability to zero, but cannot generate a refund.
Can I claim the adoption credit if I adopt the same child more than once?
You cannot claim the adoption credit for the same child more than once. However, you may claim adoption expenses if you legally adopt a foreign child in the United States.
How do adoptive parents qualify for the federal adoption tax credit?
Adoptive parents qualify if they paid qualified adoption expenses during the tax year and meet the income limits established by the IRS.
What are qualified expenses under Form 8839 (2024)?
Qualified expenses include adoption fees, attorney fees, court costs, and travel expenses directly related to the adoption effort of an eligible child.
Can I claim the Child Tax Credit and the Adoption Credit for the same adopted child?
Yes, you may claim both credits as long as you meet the eligibility rules for each. The child tax credit is separate from the adoption credit.
What happens to unused credits under the adoption credit carryforward rule?
Unused portions of the adoption credit can be carried forward for up to five years using the adoption credit carry-forward worksheet included in the IRS instructions for Form 8839.
How do employer-provided adoption benefits affect my total qualified adoption expenses?
Employer-provided benefits reduce the amount of qualified adoption expenses you can claim. Report them accurately to avoid double-counting the exact costs.
