Is there a tax credit for adoption?
Yes, and it is much improved and makes adoption much more affordable. For calendar year 2010, the maximum credit is $12,170 per child, although the credit gradually phases out once your modified adjusted gross income meets $182,520, up to a modified adjusted gross income level of $222,520, when it completely phases out. For domestic adoptions, the tax credit may be claimed, even if the adoption does not take place; however, for non-domestic adoptions, the tax credit only may be claimed after the adoption becomes final. While without question meticulous record keeping is essential, the Internal Revenue Service (IRS) lists a wide range of “qualifying expenses” including but not limited to: adoption fees; court costs; attorney’s fees; and travel-related lodging and meals. And, for adoption of the broadly defined “special needs” child, the IRS allows a claim for the full amount of the tax credit, without any attendant requirement either to document, pay, or incur related costs. Plus, separate and distinct from any tax credit, the IRS permits adopting families to exclude from income those adoption-related expenses either directly paid for or reimbursed by an employer assistance program.
What is best is to consult with a tax advisor, such as a certified public accountant, CPA. There also are a plethora of resources available on the web, including articles, resource guides, and publications from the IRS. (See IRS Code §23 and www.irs.gov), the Casey Foundation, (www.casey.org), the National Foster Parent Association (www.nfpainc.org), magazines like Adoptive Families (www.adoptivefamilies.com).