From the IRS—

Adoptive parents around the country may qualify for a tax credit. Parents who either adopted a child or tried to adopt a child may claim the adoption credit. Here are 9 things you should know about this credit:

1. The credit is non-refundable. This means the credit may only reduce your tax liability to zero. If the credit is more than the tax owed, you can’t receive an additional amount as a refund.
2. You can carry an unused credit forward to the next year. This happens when a credit is more than the tax owed. In other words, taxpayers who have an unused credit in tax year 2017 can use it to reduce their taxes for 2018. Remaining credits can be carried forward for up to 5 years, or until the credit is fully used, whichever comes first.
3. If your employer helped pay for the adoption through a qualified adoption assistance program, you may qualify to exclude that amount from tax.
4. An eligible child is an individual under age 18. It can also be an individual of any age who is physically or mentally unable to care for themselves.
5. Special rules apply to taxpayers who adopted an eligible U.S. child with special needs. You may be able to take the exclusion even if you didn’t pay any qualified adoption expenses.
6. Adoption expenses must be directly related to the adoption of the child. The expenses must also be reasonable and necessary. Types of expenses that can qualify include adoption fees, court costs, attorney fees and travel.
7. In most cases, you can claim the credit whether the adoption is domestic or foreign. However, the rules for which year you can claim qualified expenses differ between these 2 types of adoption.
8. Depending on the adoption’s cost, you may be able to claim both the tax credit and the exclusion. However you can’t claim both a credit and exclusion for the same expenses.
9. The credit and exclusion are subject to income limitations. The limits may reduce or eliminate the amount you can claim depending on the amount of your income.