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.
