Alabama offers both an Adoption Expense Adjustment and an Adoption Tax Credit for qualifying taxpayers. If you meet the requirements, you may be able to claim both benefits on your Alabama return.
Adoption Expense Adjustment
Alabama allows resident taxpayers to claim certain adoption-related expenses as an adjustment to income on their Alabama return.
What Expenses Qualify?
You may claim reasonable medical and legal expenses paid or incurred in connection with the adoption of a minor.
Examples of qualifying medical expenses include:
- Medical and hospital expenses of the child and the child's biological mother related to the child's birth.
- Medical expenses incurred for the child after birth.
- Certain legal expenses related to the adoption process.
What Expenses Do Not Qualify?
Adoption agency fees are not deductible as an Alabama adjustment to income.
Are the Expenses Limited?
Yes.
- You may only claim expenses that were paid or incurred during the tax year.
- Part-year residents may only claim expenses incurred while they were Alabama residents.
- The Alabama Department of Revenue may request documentation supporting the claimed expenses.
Program Entry
State Return → Adjustments to Income → Adoption Expenses
Enter your qualified adoption expenses paid or incurred during the tax year.
Adoption Tax Credit
Alabama offers a one-time refundable Adoption Tax Credit for qualifying adoptions that become final during the tax year.
How Much Is the Credit?
For tax years 2023 through 2027:
- $2,000 per child for a private adoption or qualified foster child adoption when the adopted child is an Alabama resident and the adoptive parent(s) reside in Alabama.
- $1,000 per child adopted through an out-of-state adoption or when the adopted child is not an Alabama resident.
Who Qualifies?
You may qualify if:
- The adoption became final during the tax year.
- The adoption is a private adoption, out-of-state adoption, or adoption of a qualified foster child.
- The child is not your spouse's child. Adopting a spouse's child does not qualify for the credit.
Program Entry
State Return → Credits → Adoption Tax Credit
- Select Adoption Tax Credit.
- Enter the adopted child's information.
- Complete any additional information requested by the program.
The program will complete Schedule AAC (Alabama Adoption Tax Credit), if applicable.
Can I Claim Both the Adoption Expense Adjustment and the Adoption Tax Credit?
Yes. If you meet the requirements for both benefits, you may claim both the Adoption Expense Adjustment and the Adoption Tax Credit on your Alabama return.
Additional Information
Note: Keep copies of adoption records, court documents, and receipts for any expenses claimed on your return in case the Alabama Department of Revenue requests supporting documentation.