The adoption tax credit was created to help couples afford the cost of an adoption. Great news! The adoption tax credit is still available to you, and the amount it offers has increased each year. However, there are some aspects of the program that need to be considered.
First, since it's a tax credit, it can reduce the amount of Federal income tax you're required to pay. As of 2017, the amount is up to $13,460. Here's an example to help us explain: let's say you owe $5,000 in taxes. The adoption tax credit will wipe out that debt, and the remaining $8,460 can be rolled over into future tax years, for up to five years. But keep in mind that the adoption tax credit may only be used as a credit against a tax liability. So, for example, if you have a tax liability of $2,000 each year, you'll only be able to use $10,000 of the adoption tax credit.
Secondly, you can only get credit for actual adoption expenses if you had a domestic or international adoption. For a special needs adoption, as designated by the state you adopted from, you can use the full $13,460. You're able to use that amount even if you didn't spend that amount in adoption-related costs.
Finally, the adoption tax credit may also be used against adoption expenses that resulted in a failed adoption.
You can check out additional details about the adoption tax credit at IRS.gov/taxtopics/tc607.html. The info here is not intended as financial advice; please consult with your accountant.