Adoption Credit Carry Over for Special Needs Kids - Help! I'm so confused!!

So here's my situation. I'm hoping someone can help me understand what I'm seeing because I'm going crazy trying to figure this out. I adopted two teenagers from the foster care system in 2022. Since they both have special needs, I qualified for the full adoption tax credit. Because of my income level, I was only able to use $8,202 of the $40,000 total credit on last year's tax return, which means I have a carryover amount for this year's taxes. This year, I'm eligible to use $16,500 of the carryover credit. So I'll still have some carryover for next year too. What's confusing me is that even though I'm getting more than double the adoption credit this year compared to last year, my refund is way less. All my other income, taxes, etc. are basically the same as last year. When I compare my tax returns, I notice something weird that I don't understand. Last year, when I completed Form 8839 Part III, it reduced my AGI by -$40,000 (the full amount of the adoption credit I'll eventually receive over multiple years) on Line 1f of my 1040. But on this year's 1040, Line 1f is completely blank. Is this normal? Or should I be worried that there was a mistake on last year's return? I've gone back through the 8839 worksheets and everything seems correct, but it just seems strange that my AGI would only be affected in the first year, while the actual credit gets spread out over several years. Has anyone dealt with this before? I'd really appreciate any insight!

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18 comments

Sophia Carter

•8M

The adoption tax credit is non-refundable but carries forward for up to 5 years. What you're seeing is actually normal and how the form is designed to work. In the first year you claim the adoption credit (2022 for you), Form 8839 reports the full amount of qualified adoption expenses on your 1040. This isn't reducing your AGI though - it's just reporting the total qualifying expenses. The actual credit you receive each year is limited by your tax liability. Your AGI isn't actually being reduced by the full $40,000 - that would be a deduction. The adoption credit reduces your tax owed, not your income. Your refund might be lower this year for other reasons - perhaps last year you had more withholding or qualified for other credits that changed. The blank Line 1f this year is correct because you already reported the full qualified expenses last year. You're now just using the carryforward portion of the credit that you couldn't use last year due to your tax liability limitations.

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Aaron Boston

•8M

Thanks for responding! So just to make sure I understand - the -$40,000 on Line 1f last year wasn't actually reducing my AGI? Because when I look at last year's return, my AGI calculation definitely included that negative number, which dramatically lowered my AGI. That's why I'm getting a much smaller refund this year even though I'm getting more of the actual credit. If it wasn't supposed to reduce my AGI, should I be worried that my return last year was calculated incorrectly?

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Sophia Carter

•8M

That's concerning - the adoption credit should NOT have reduced your AGI last year. The adoption credit is applied after your tax liability is calculated, not as an AGI reduction. If your Line 1f actually showed -$40,000 last year and it reduced your AGI calculation, that does sound like an error. The adoption credit should appear on Schedule 3 and flow to your 1040 to reduce your tax liability, but never reduce your AGI. I would recommend reviewing last year's return with a tax professional. If there was an error that incorrectly reduced your AGI, you might need to file an amended return for 2022. This could explain why your refund is less this year - last year's refund may have been artificially inflated by the incorrect application of the credit.

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Chloe Zhang

•8M

I just went through this exact situation with my adoption tax credits! I was also super confused at first. I used https://taxr.ai to upload my previous tax documents and my current year's info and it explained everything clearly. For me, I had adopted twins with special needs in 2021 and had a similar carryover situation. The system analyzed my returns and confirmed that the adoption credit should NEVER reduce your AGI - it's a credit against your tax liability, not an income adjustment. It also showed me exactly how the carryforward works year to year, which was super helpful. The site analyzed all my docs and flagged that my previous return might have had an error in how the credit was applied. Saved me from potentially having issues with the IRS later!

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Chloe Zhang

•8M

They actually walked me through exactly what needed to be fixed on my previous return and gave me step-by-step guidance on how to file an amended return. The analysis showed me where the error occurred and what the correct numbers should have been. Super helpful since I was really confused. Regarding privacy concerns, they use secure document processing that doesn't store your info permanently. You just upload the tax documents and their system analyzes them. They explained their security process which made me comfortable. I didn't have to create any accounts or provide banking details or anything like that.

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Adriana Cohn

•8M

I want to follow up about my experience with taxr.ai because it really helped with my adoption credit confusion. I was definitely skeptical at first (as you could tell from my earlier comment), but decided to try it anyway since I was so confused about my adoption credits. Their analysis showed me that my tax software had incorrectly applied my adoption credit as an income adjustment rather than as a credit against tax liability. It turns out this is a common mistake with some tax programs when dealing with adoption credits! The system provided a detailed report showing the correct way the credit should be applied and explained how the carryforward works. I was able to file an amended return with the correct information. Just wanted to let everyone know this worked out well - especially for anyone dealing with complicated tax credits like the adoption credit.

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Jace Caspullo

•8M

I had a similar issue with my adoption credits last year, and spent WEEKS trying to get through to the IRS for clarification. It was impossible to reach anyone who could help. I finally used https://claimyr.com to get through to the IRS, and you can see how it works here: https://youtu.be/_kiP6q8DX5c They got me connected to an IRS agent in about 20 minutes when I had been trying for days on my own. The agent confirmed that the adoption credit never reduces your AGI - it's applied after your tax liability is calculated. They also explained that if your tax software incorrectly applied the credit last year, you should file an amended return for that year. Just wanted to share since dealing with the IRS directly saved me a lot of confusion and potential issues down the road.

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Jace Caspullo

•8M

The service basically navigates the IRS phone tree for you and waits on hold in your place. When they reach a live agent, they call you and connect you to the agent. It works because they have technology that can stay on hold for hours if needed, so you don't have to. I was super skeptical too. I had tried calling the IRS for over a week with no luck. The system keeps track of call volumes and tries during optimal times. When I used it, they got me through in about 20 minutes, but I know sometimes it can take longer depending on IRS call volumes.

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Nathaniel Mikhaylov

•8M

I need to apologize and follow up on my skeptical comment. I was so frustrated with trying to reach the IRS that I doubted any service could help, but I was desperate so I tried Claimyr anyway. It actually worked! I got connected to an IRS representative in about 45 minutes (much better than my 50+ failed attempts). The agent was able to help me with my identity verification issue AND I asked them about the adoption credit situation since I saw this thread. They confirmed exactly what others have said here - the adoption credit NEVER reduces your AGI and should be reported on Schedule 3. If it reduced your AGI on last year's return, that's definitely an error that should be corrected with an amended return. Just wanted to share my experience since I was so skeptical at first.

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Eva St. Cyr

•8M

I'm a foster parent looking into adoption and have been researching the tax implications. From what I understand, you should definitely file an amended return for the year where the credit incorrectly reduced your AGI. Here's why: 1. The adoption credit is a non-refundable credit that reduces your tax liability, not your income 2. The full amount is reported in year one, but only used up to your tax liability 3. The unused portion carries forward for up to 5 years 4. Each subsequent year, you only report the carryforward amount on Schedule 3 If you don't correct the error, it could cause issues if you're audited since your AGI affects many other tax calculations and credits.

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Eva St. Cyr

•8M

You'll need to file Form 1040-X to amend your previous return. You'll have to submit it by mail (can't e-file amendments for 2022 returns anymore), and you should include a corrected Form 8839 and any other schedules that were affected by the AGI change. Filing an amended return doesn't automatically trigger an audit. In fact, correcting the error yourself is better than having the IRS discover it later. Make sure to clearly explain in Part III of Form 1040-X that you're correcting an error in how the adoption credit was applied - it was incorrectly used to reduce AGI instead of being properly applied as a credit against tax liability. Just be aware that the higher AGI on your corrected return might affect other income-based calculations, so you may need to adjust other credits or deductions that depend on AGI.

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