What Form 8839 Is For
Form 8839 (2023) helps adoptive parents claim the federal adoption tax credit and the income exclusion for employer-provided adoption assistance. It covers all qualified adoption expenses related to the legal adoption of an eligible child. These include reasonable and necessary expenses such as adoption fees, attorney fees, court costs, and travel expenses.
Adoptive parents use this IRS form to calculate their total qualified adoption expenses, determine whether they can claim the full credit or a partial credit, and report any adoption benefits received through a qualified adoption assistance program.
When You’d Use Form 8839 (2023)
You must file Form 8839 (2023) if you paid qualified adoption expenses in the same tax year for a domestic adoption, foreign child adoption, or a foreign adoption. Taxpayers may also file late or amended returns to claim the credit or exclusion for prior years. The form applies when your adoption effort began before finalization or if you received employer-provided benefits during the adoption process. Adoptive parents should also use it to report any adoption credit carry-forward or income exclusion from employer-provided adoption benefits.
Key Rules or Details for 2023
- Income limits for the adoption tax credit: The federal adoption tax credit phases out based on your adjusted gross income. For 2023, a modified adjusted gross income (MAGI) of $239,230 or less allows the full credit, while income between $239,231 and $279,229 qualifies for a partial credit. No credit applies above $279,230.
- Eligible adoption expenses under state or federal law: Qualified expenses include reasonable and necessary costs such as legal fees, travel expenses, adoption fees, and court costs directly related to the adoption effort.
- Employer-provided adoption assistance exclusion: You may exclude employer-provided benefits from taxable income under a qualified adoption assistance program, but you cannot claim both the exclusion and the credit for the same expenses.
- Special needs and minority or sibling group adoptions: Families adopting a U.S. child with special needs or who are part of a minority or sibling group may claim the maximum adoption credit, even if no expenses are paid.
- Child identification requirement: To claim the credit, provide the child’s identifying number—either a Social Security number, adoption taxpayer identification number, or individual taxpayer identification number.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Gather Documentation
Collect all receipts for paid qualified adoption expenses, including attorney fees, adoption fees, travel expenses, and agency invoices. Include any employer-provided adoption benefits listed on your W-2 under code “T.”
Step 2: Complete Part I
Enter each eligible child’s details, such as name, birth year, child’s identifying number, and whether the adoption is domestic or of a foreign child. Indicate if the child has special needs or was part of a minority or sibling group.
Step 3: Complete Part III First (If You Received Adoption Benefits)
Calculate any income exclusion from employer-provided benefits before filling out Part II. This prevents counting the same expenses twice when determining your tax benefit.
Step 4: Complete Part II to Claim the Adoption Credit
Enter your total qualified adoption expenses, apply any prior year benefits worksheet results, and use the credit limit worksheet to determine your maximum amount. The credit cannot exceed your federal income tax liability.
Step 5: Report Carryforward or Partial Credit
If you cannot use the entire credit this year, use the adoption credit carry-forward worksheet to determine your remaining balance. The unused credit may reduce your tax liability for up to five years.
Step 6: Attach to Your Tax Return
Attach Form 8839 to your federal income tax return and report the credit on Schedule 3. This ensures your adoption expenses and benefits are correctly reflected under federal tax credit rules.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Double-counting the same expenses: Taxpayers often claim the same expenses for both the adoption credit and the income exclusion. To avoid this, qualified separate expenditures covered by employer-provided benefits are excluded from those paid out of pocket.
- Claiming the credit too early for a foreign child: For foreign adoptions, claim the credit only in the year the legal adoption becomes final. Waiting until completion prevents IRS disallowance.
- Missing documentation for special needs adoptions: Keep state-issued proof confirming the child’s special needs status. Without it, you may lose eligibility for the full credit.
- Incorrectly combining multiple adoption efforts: Combine expenses for multiple adoption attempts of the same child into one entry. This keeps your qualified expenses accurate.
- Ignoring carryforward rules: If your credit exceeds your tax liability, use the adoption credit carryforward worksheet. Track remaining amounts for future tax years to avoid losing your benefit.
- Using the incorrect adjusted gross income: Ensure your modified adjusted gross income calculation includes the addition of excluded foreign income or other items. Misreporting may reduce your eligible credit.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
Once you file Form 8839 with your federal income tax return, the IRS reviews your qualifying expenses and verifies your adoption effort. Processing time may take several weeks, especially for claims involving foreign children or adoption expenses.
Any unused portion of your maximum adoption tax credit carries forward automatically. Keep records of all expenses paid, including receipts and employer-provided adoption benefits, for at least three years after the date of filing. Correct errors by submitting an amended tax return with Form 1040-X if necessary.
FAQs
Can I claim the adoption credit for the same child in more than one tax year?
You can claim qualified expenses for the same child across multiple years only if the adoption process spanned several tax years. Each year’s paid expenses are counted only once.
What are qualified expenses for the adoption tax credit?
Qualified expenses include adoption fees, court costs, attorney fees, travel expenses, and other reasonable and necessary expenses directly related to a legal adoption effort.
How does my adjusted gross income (MAGI) affect the adoption tax credit?
Your modified adjusted gross income determines whether you receive the full credit or claim partial credit. Higher income may limit or eliminate eligibility for the federal tax credit.
Can adoptive parents claim both the exclusion and the credit for adoption benefits?
Adoptive parents cannot claim both the exclusion and the credit for the same expenses. Expenses reimbursed under employer-provided adoption assistance do not qualify for the credit.
How do I handle the adoption credit carry-forward if I am unable to use it all this year?
If your credit exceeds your tax liability, carry forward the unused amount for up to five years using the adoption credit carryforward worksheet provided in the IRS instructions.
Who qualifies as an eligible child for the adoption tax credit?
Eligible children include those under age 18 or individuals physically or mentally incapable of self-care. A foreign child is eligible once the legal adoption becomes final.
Can I claim the adoption credit if I adopted my spouse’s child?
You cannot claim the adoption credit for adopting your spouse’s child. The IRS excludes these situations because the relationship already exists under state or federal law.
