How Does Adopting a Child Impact Taxes in Illinois?
Families and individuals considering adoption face many obstacles, including financial considerations. To help ease the financial burden, both the federal government and the state of Illinois offer adoption tax credits that can make a significant difference in the adoption journey.
What is the Federal Adoption Tax Credit?
The federal government offers a non-refundable tax credit to eligible adoptive parents, helping offset qualified adoption expenses. As of 2025, the maximum credit amount is $17,280 per child for families with modified adjusted gross incomes of up to $259,190. The maximum credit is reduced for those earning in excess of $259,190 and phases out entirely at $299,190. It’s important to note that the maximum credit, as well as the qualifying adjusted gross income, changes yearly. Any unused credit may also be carried forward for up to five years.
Qualified adoption expenses include reasonable and necessary fees directly related to the adoption, including:
- Adoption fees
- Court costs
- Attorney fees
- Travel expenses
To claim the federal adoption tax credit, the IRS Form 8839, Qualified Adoption Expenses, must be filed along with tax returns.
What is the Illinois Adoption Tax Credit?
In addition to the federal adoption tax credit, the state of Illinois offers its own adoption tax credit, providing further financial relief to adoptive parents. Illinois residents can claim a tax credit up to $2,000 ($1,000 for married filing separate) per child for qualified adoption expenses. For adoptions of children that are Illinois residents and at least one year old, the tax credit can be up to $5,000 ($2,500 for married filing separate.)
To claim the Illinois adoption tax credit, the Schedule 1299-C form should be filed along with the family’s state income tax return. Like the federal credit, qualified adoption expenses for the Illinois credit include adoption fees, court costs, attorney fees and other related expenses.
Tax Credits for Children with Special Needs
Adoptive parents of children with special needs are automatically entitled to the full adoption tax credit and do not need to provide qualifying adoption expenses. Any youth in care is considered a special needs child for adoption tax credit purposes.
While in the process of adoption or planning to do so, families and individuals should explore the adoption tax credits offered at both the federal and state levels with a tax professional. These credits can be valuable resources to help alleviate some of the financial aspects associated with expanding a family through adoption.