Quick answer

There are two primary federal tax pathways families use to reduce the cost of expanding a family:

  • The Adoption Tax Credit (plus a possible employer adoption-assistance exclusion) for qualifying adoption expenses. Claim this with IRS Form 8839. (See IRS Pub. 968.)
  • The medical expense deduction for fertility treatment costs when you itemize on Schedule A and your total unreimbursed medical expenses exceed 7.5% of your adjusted gross income (AGI). (See IRS Pub. 502.)

Both sets of benefits have specific rules, documentation requirements, and annual dollar limits that can change from year to year. Always check the current IRS publications before filing.

How the adoption tax credit works

  • What it covers: Qualified adoption expenses include adoption fees, court costs, attorney fees, travel and lodging (when primarily for and essential to the adoption), and certain other direct costs of adopting a child. For international adoptions some expense categories differ—review IRS guidance. IRS Publication 968 explains the full list.

  • How you claim it: Use Form 8839 (Qualified Adoption Expenses) when you file your federal return. If the credit is larger than your tax liability, unused credit can generally be carried forward for up to five tax years (subject to current law).

  • Employer adoption assistance: If your employer offers an adoption-assistance program, those benefits may be excluded from your taxable income up to a limit; this exclusion affects how much credit you may claim for the same expenses. Form 8839 handles both the credit and the exclusion.

  • Limits and inflation adjustments: The maximum credit amount and income-based phaseouts are indexed and updated periodically. For example, the credit was $15,950 in 2023. Because these figures change, confirm current numbers on the IRS site or Pub. 968 before filing.

See also: Adoption Credit on FinHelp

How fertility-treatment expenses can be deductible

  • What qualifies as a medical expense: The IRS treats diagnosis and treatment of infertility as a medical condition. Typical qualified expenses include IVF (in vitro fertilization), IUI (intrauterine insemination), fertility medications, certain lab fees, procedures required to store and transfer embryos, and some costs related to surgeries to treat infertility. Cosmetic procedures generally do not qualify. Pub. 502 lists examples and rules.

  • How the deduction works: Medical expenses are deductible as itemized deductions on Schedule A of Form 1040 only to the extent the total unreimbursed medical expenses exceed 7.5% of your AGI (current threshold). You may only deduct the portion that exceeds that threshold.

  • Interaction with tax-advantaged accounts: You can use pre-tax funds from HSAs or FSAs to pay fertility treatments (if the plan’s rules allow). Money spent from a tax-advantaged plan is not deductible as a medical expense on Schedule A—do not double-claim the same expense. HSA rules are reported on Form 8889.

See also: Medical Expense Deductions: When You Can Claim Them

Documentation and recordkeeping (what I recommend from practice)

  • Keep copies of all invoices, receipts, cancelled checks, credit-card statements, court papers, attorney contracts, and travel receipts related to adoption or fertility care.
  • For adoption: retain documentation showing the adoption date, final decree, and any foreign-adoption paperwork (U.S. citizens adopting abroad have additional documentation rules).
  • For medical deductions: keep itemized statements from clinics showing procedure codes, dates, and descriptions. Also save EOBs (Explanation of Benefits) and records of reimbursements.

In my practice, clients who prepare a single, dated folder (electronic and hard-copy) with invoices, proof of payment, and relevant court documents reduce audit stress and accelerate filing.

How to claim (forms and where things go)

  • Adoption credit and adoption assistance exclusion: Form 8839 with your Form 1040. Form 8839 will walk you through qualified expenses, employer benefits, and any carryforward.
  • Medical expense deduction: Itemize on Schedule A (Form 1040). Only the portion of qualifying medical expenses above 7.5% of AGI is deductible.
  • HSA/FSA: HSA distributions are reported on Form 8889; FSA reimbursements appear on your W-2 year-end summaries and plan documentation.

Always attach required forms and keep documentation; the IRS may request proof if your return is selected for review.

Practical example (simple math)

Example 1 — Adoption credit:

  • Total qualified adoption expenses: $20,000
  • Maximum credit in year of adoption (example): $15,950 (check current year)
  • Tax liability before credit: $10,000
    Result: You can use the credit to reduce tax to zero and carry forward the $5,950 remaining credit to a future year (subject to carryforward rules).

Example 2 — IVF medical deduction:

  • AGI: $120,000 → 7.5% AGI threshold = $9,000
  • Unreimbursed fertility medical expenses: $30,000
  • Deductible amount = $30,000 − $9,000 = $21,000 (if you itemize and meet other conditions)

Note: Using HSA funds to pay $30,000 would remove the ability to claim those amounts again as itemized deductions.

State tax differences

States treat adoption credits and medical deductions differently. Some states conform to federal rules for the adoption credit or medical deductions; others have separate limits or do not allow the federal deduction. Check your state tax agency or a tax professional to confirm how your state handles these items.

Common mistakes to avoid

  • Double-dipping: Don’t claim the same expense as a tax-free employer benefit and a federal credit or deduction.
  • Poor documentation: Missing receipts, unsigned court documents, or incomplete payment records are common audit triggers.
  • Ignoring carryforward rules: If you have more credit than tax, file correctly to capture unused credit carryforward years.
  • Assuming all fertility costs qualify: Cosmetic procedures and certain nonmedical services generally don’t qualify as medical expenses.

Frequently asked practical questions

  • Can I use an HSA for IVF and still claim a deduction? No — if you pay for the expense with HSA funds you cannot also deduct that expense on Schedule A. HSAs are tax-preferred already.

  • Does travel for international adoption qualify? Some travel and lodging costs incurred primarily for completing a foreign adoption may qualify—keep detailed proof and review Pub. 968.

  • Are adoption-related loan interest payments deductible? If you take a personal loan to fund adoption costs, the interest on that personal loan is generally not deductible as medical interest. However, if a loan’s structure makes interest qualify under another category, consult a tax professional.

Professional tips

  1. Plan timing: If your expected adoption credit will exceed current-year tax liability, consider whether timing some expenses into the next tax year or using employer assistance changes outcomes.
  2. Coordinate benefits: Ask your HR department for details on an employer adoption-assistance program and confirm how benefits will be reported on your W-2.
  3. Work with a tax pro for complex cases: International adoptions, surrogacy arrangements, and multi-state interactions can create complicated tax issues that benefit from professional help.

Where to confirm rules and limits

For state rules, check your state department of revenue website.

Internal FinHelp resources

Bottom line

Both the adoption credit and medical expense deduction for fertility care can meaningfully reduce the net cost of growing a family, but they require careful documentation, correct use of forms, and attention to annual limits and AGI thresholds. Treat this article as educational—consult a tax professional for personalized tax-planning and to confirm current-year dollar limits and phaseouts.

Author’s disclaimer: This content is educational and not individualized tax advice. Tax laws and numeric limits change; confirm current rules with the IRS or a qualified tax professional before filing.