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How to Know If You Qualify for the Federal Adoption Tax Credit


Adoption is subsidized as a federal adoption tax credit by the U.S. government. In fact, these family tax benefits were adopted into law by the new health care reform bill of March 23, 2010. Congress increased the amount of the federal adoption tax credit to $13,170 per each adopted child while extending the tax credit until December 31, 2011.

Qualifications for the Adoption Tax Credit

If the modified adjusted gross income (AGI) of your family is equal to or under $182,520, you can qualify for the full adoption tax credit. For AGI that exceeds $182,520 and is under $222,520, you can receive the reduced tax credit that is also offered. When an AGI is over $222,520 annually, there is no access to the tax credit.

Expenses that Qualify

Only "qualified adoption expenses" may be applied toward the credit, which includes necessary and reasonable adoption costs. Qualified costs can include attorneys, agency and court fees, living and traveling expenses, and other direct expenses relating to the sole purpose of the legal adoption of a child under the age of 18.

Special Expenses

Also, any expenses which are state required, like making household adjustments like putting a a fence around a pool, can also qualify as an adoption expense. Expenses may be either from a domestic or international adoption. Special needs for children may also qualify for full adoption tax credit, even when the full amount of expenses has not been incurred.

Unqualified Expenses

Expenses that are reimbursed through any form of employee benefit plan do not qualify. Costs incurred for surrogacy or step-parents will also not qualify toward the adoption tax credit.

When to Claim Adoption Tax Credit

Adoption tax credit is available as a family tax benefit during the year that the expense was incurred. However, you may also claim the credit during the year after a planned adopted child is born, either outside or inside of the United States. If expenses are incurred after the finalized adoption, you can claim the tax credit during that year. However, for international adoptions, credit can only be claimed after a finalized adoption.

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