What's the Difference Between the Adoption Credit and the Adoption Assistance Exclusion?

Families who adopt a child can take advantage of two different tax benefits that work together: the adoption credit and the adoption assistance exclusion. The adoption credit allows you to claim a credit of up to $15,950 per child (in 2024) for qualified adoption expenses paid out of pocket, including legal fees, court costs, and agency fees. The adoption assistance exclusion applies when your employer provides adoption benefits through a workplace program — up to $15,950 of those employer-provided benefits can be excluded from your taxable income. You can use both in the same adoption, but you can't claim the credit for the same expenses covered by your employer's assistance program. For special needs adoptions of children from the U.S. foster care system, you can claim the full credit regardless of your actual out-of-pocket expenses.