What IS the Adoption Tax Credit?

After it made headlines for its near-death in the republican tax bill, you may be wondering what the adoption tax credit is, exactly.

Meghan Rivard December 22, 2017
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Because of the tax reform bill, there has been a lot of discussion concerning the adoption tax credit. Many people were advocating (or not) to keep the credit for adoptive families. But what exactly is the tax credit and what should you know about the credit as an adoptive parent?

First, what is the adoption tax credit? As stated in this article, it is a nonrefundable credit that helps families offset adoption expenses. It applies to all types of adoptions, except step parent adoptions. Fees that you can include are adoption fees, attorney fees, court costs, and travel costs. For the current year, the maximum credit is $13,570 per child. It is also per child. For example, if you adopt two children in 2017, your maximum is $13,570 x 2 or $27,140. It is also non-refundable, meaning the credit cannot exceed your tax liability for the year.  If unable to claim the full credit in one year, the adoption expense balance can be carried forward to future years.

A question that some ask is if claiming the tax credit will increase their chances of getting audited. The answer is probably – 69% of all adoption tax credit claims in the 2012 filing season were selected for audit. So just be prepared, and keep good records to support your adoption expenses.

The credit in a special needs adoption is also $13,720; however, that full amount may be claimed even if expenses for that amount were not met. According to this news article, “A child with special needs is defined as a U.S. citizen or resident determined by a state to be unlikely to be adopted unless adoption assistance is provided due to the child’s age, ethnic background, medical condition, membership in a minority group or sibling group, or some other specific reason.” There can be additional assistance adopting a child with special needs in the form of other financial aid, but “children adopted internationally do not qualify for special needs even if they have been diagnosed with special needs.”

The adoption tax credit is very helpful in defraying some of the high costs of adoption.  It is important to be well informed about the credit.

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Meghan Rivard

Meghan is an adoptive mother and a big advocate of adoption and foster care. She resides in Indiana with her husband, their one-year-old daughter who is the center of their lives, and their dog Max. She has a Bachelor's and Master’s Degree in Social Work. Meghan stays at home with her daughter but is so happy she found this outlet to share her personal adoption story and educate about adoption!

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