Adoption tax credit
Encyclopedia
An adoption tax credit is tax credit
offered to adoptive parents to encourage adoption
.
Section 36C of the United States Internal Revenue code
offers a credit for “qualified adoption
expenses” paid or incurred by individual taxpayers. The credit is now refundable as of 2010, due to changes included in the Health Care and Education Reconciliation Act of 2010
.
, attorney fees
, traveling expenses (including amounts spent for meals and lodging while away from home), and other expenses directly related to and for which the principal purpose is the legal adoption of an eligible child. The adoption tax credit is per child, thus the credit doubles when adopting two children in the same year. It is also important to note that this is a "credit" not a mere "deduction." A tax credit is a dollar for dollar reduction of federal tax, not a reduction of taxable income, such as with a mortgage payment.
Parents who adopt a child with special needs (meaning a child who receives adoption assistance/adoption subsidy) can claim the full credit without documenting expenses. (See the IRS FAQs, paragraph 2 of question 1 at http://www.irs.gov/individuals/article/0,,id=231663,00.html.) Parents will need to document the child has special needs, and this documentation can include the adoption assistance/adoption subsidy agreement, a letter from the state/county approving the child for adoption assistance/adoption subsidy, or a letter from the state/county child welfare agency stating that the child has special needs. See question 13 at the FAQs for information about documentation.
with the credit increased by $1,000 to $13,170.
Tax credit
A tax credit is a sum deducted from the total amount a taxpayer owes to the state. A tax credit may be granted for various types of taxes, such as an income tax, property tax, or VAT. It may be granted in recognition of taxes already paid, as a subsidy, or to encourage investment or other behaviors...
offered to adoptive parents to encourage adoption
Adoption
Adoption is a process whereby a person assumes the parenting for another and, in so doing, permanently transfers all rights and responsibilities from the original parent or parents...
.
Section 36C of the United States Internal Revenue code
Internal Revenue Code
The Internal Revenue Code is the domestic portion of Federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 26 of the United States Code...
offers a credit for “qualified adoption
Adoption
Adoption is a process whereby a person assumes the parenting for another and, in so doing, permanently transfers all rights and responsibilities from the original parent or parents...
expenses” paid or incurred by individual taxpayers. The credit is now refundable as of 2010, due to changes included in the Health Care and Education Reconciliation Act of 2010
Health Care and Education Reconciliation Act of 2010
The Health Care and Education Reconciliation Act of 2010 is a law that was enacted by the 111th United States Congress, by means of the reconciliation process, in order to amend the Patient Protection and Affordable Care Act...
.
Qualified adoption expenses
Qualified expenses include: adoption fees, court costsCourt costs
Court costs are the costs of handling a case, which, depending on legal rules, may or may not include the costs of the various parties in a lawsuit in addition to the costs of the court itself. Court costs can reach very high amounts, often far beyond the actual monetary worth of a case...
, attorney fees
Attorney's fee
Attorney's fee is a chiefly United States term for compensation for legal services performed by an attorney for a client, in or out of court. It may be an hourly, flat-rate or contingent fee. Attorney fees are separate from fines, compensatory and punitive damages, and from court costs in a...
, traveling expenses (including amounts spent for meals and lodging while away from home), and other expenses directly related to and for which the principal purpose is the legal adoption of an eligible child. The adoption tax credit is per child, thus the credit doubles when adopting two children in the same year. It is also important to note that this is a "credit" not a mere "deduction." A tax credit is a dollar for dollar reduction of federal tax, not a reduction of taxable income, such as with a mortgage payment.
Parents who adopt a child with special needs (meaning a child who receives adoption assistance/adoption subsidy) can claim the full credit without documenting expenses. (See the IRS FAQs, paragraph 2 of question 1 at http://www.irs.gov/individuals/article/0,,id=231663,00.html.) Parents will need to document the child has special needs, and this documentation can include the adoption assistance/adoption subsidy agreement, a letter from the state/county approving the child for adoption assistance/adoption subsidy, or a letter from the state/county child welfare agency stating that the child has special needs. See question 13 at the FAQs for information about documentation.
Limitations
To be eligible for the full tax credit, the adopting parent's modified adjusted gross income cannot exceed $182,520. The taxable income may reach $222,520, but it is gradually phased out when in excess of $182,520.Latest news
The Adoption Tax Credit has been extended and expanded as part of the Health Care and Education Reconciliation Act of 2010Health Care and Education Reconciliation Act of 2010
The Health Care and Education Reconciliation Act of 2010 is a law that was enacted by the 111th United States Congress, by means of the reconciliation process, in order to amend the Patient Protection and Affordable Care Act...
with the credit increased by $1,000 to $13,170.