what are qualified adoption expenses qae 
qualified adoption expenses are the necessary costs paid to adopt a child younger than 18 years of age or any disabled person who requires care in the united states qualified adoption expenses qae are those expenses that the internal revenue service irs defines as reasonable and necessary and can be used to claim an adoption credit or exclusion that reduces the adopting parents taxable income 1understanding qualified adoption expenses qae the internal revenue service allows you to offset your tax bill with a credit for your qualified adoption expenses as long as you meet certain eligibility requirements to report your qualified adoption expenses you ll use irs form 8839 3eligible taxpayers use irs form 8839 to provide the information required to claim the adoption credit on their federal tax returns taxpayers must provide the adopted child s first and last names year of birth and identifying number they must also note whether the child has special needs or is foreign born 4the tax credit for qae phases out for taxpayers whose modified adjusted gross incomes exceed a certain threshold taxpayers may not claim the adoption credit for any fees paid or reimbursed by an employer or government program they also may not claim the credit when adopting a spouse s child 1if you paid qualified adoption expenses to adopt a child who is a u s resident or citizen then you may be eligible for the credit even if the adoption has not been finalized or was finalized in a different tax year you may also qualify for the credit if you paid expenses to adopt a foreign child 1the maximum credit amount allowable for adoption in 2023 2maximum qualified adoption expensesthe maximum credit amount allowed for adoptions is 14 890 per child for 2022 and 15 950 per child in 2023 2 in addition the adoption tax credit is no longer refundable meaning that to recognize the full benefit of the credit your total tax must be at least equal to the credit 1for example if your total tax for the year is only 10 000 but you spend 14 000 in qualified adoption expenses 10 000 is the most you can save in tax however if the entire credit is not used any remaining amount can be carried forward for up to five years 1for the tax year 2022 as long as your modified adjusted gross income is 223 410 or less you qualify for the full credit the credit phases out as your income increases and goes away completely when it exceeds 263 410 5for the tax year 2023 as long as your modified gross income is 239 230 or less you qualify for the full credit the credit phases out as your income increases and goes away completed when it exceeds 279 230 6taxpayers who adopt a child deemed to have special needs are generally eligible for the full credit in the year the adoption is finalized regardless of their expenses 7examples of qualified adoption expensesthe irs defines qualified adoption expenses under internal revenue code section 23 d 1 tax code explicitly states that qualified adoption expenses include 1these expenses may have been paid before an eligible child has been identified an eligible child is defined as an individual who is under the age of 18 or is physically or mentally incapable of self care 1keep track of potential qualified adoption expenses leading up to a potential adoption the irs allows costs incurred prior to an adoption to be considered for the credit 1the irs also strictly prohibits the inclusion of several types of expenses related to an adoption for consideration as a qualified adoption expense for example qualified adoption expenses explicitly do not include costs a taxpayer pays to adopt the child of the taxpayer s spouse 1there are also regulations surrounding the timing of when the credit may be taken based on the timing of when the expense occurs dollar limits are also in place for costs related to a singular adoption effort in which a credit has previously been claimed 1