The Adoption Tax Credit: Qualifications and Benefits (Part I)

Adopting a child can be one of the most rewarding experiences for couples, especially those that have not been able to have children of their own. Adoption also has a major positive impact on the child, as he/she is provided an opportunity to be raised in a loving environment where his/her needs are provided. As rewarding as adoption is, however, it can also be quite costly.

English: Pictograph/icon for child adoption. Č...
Adoption Tax Credit

With a multi-year waiting list for healthy domestic children, many couples choose to adopt from abroad. While the wait in foreign countries is far less, the expenses incurred can be enormous. The overall cost of an inter-country adoption can add up to tens of thousands of dollars. Fortunately, there is tax relief available from the IRS to help offset some of these costs.

The Adoption Tax Credit is available for $12,970 and is not refundable, meaning it can only be used to offset adoption expenses until your tax liability reaches $0. In past years, the credit was refundable and the dollar amount was higher, but the rules have changed since the 2012 tax year. To be eligible for the credit, the adoption must be completed before the child’s 18th birthday unless it is a child that is either physically or mentally handicapped, whom can be adopted at any age. However, the credit does not apply to stepchildren that are adopted by you or your spouse.

Covered Expenses: The Adoption Credit applies to all expenses that are related directly to the adoption of the child, including:

  • Adoption Agency fees
  • Attorney’s fees
  • Court costs
  • Travel, lodging, & meals
  • Miscellaneous costs

As mentioned earlier, for international adoptions, these expenses can be significantly higher. Depending on the specific country, there have been cases where the adoptive parents have had to live in the foreign country for a designated amount of time to fulfill local requirements. These are usually cases where the child is being adopted from a country that is not a party to the Hague Convention, and the only way for the adoption to take place is through the local courts.

Stay tuned for Part II…

Enhanced by Zemanta
Scroll to Top