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Okay... my spouse and I are looking to adopt an infant that is not special needs (although this may change as we discover more about what that means).
He is a bit disbelieving of me on a the information I have collected and I'm beginning to wonder if I'm right or not.
Q's:
1) Is the adoption tax credit only for special needs adoptions?
2) This may be for someone who lives in AZ but maybe some other states have similar guidelines for adoptions. If we go through a private adoption agency can the state come in and charge a fee. We were looking at the booklet our state puts out for adoptions and it states there that if you adopt a child not special needs that they will charge you and I'm thinking that this only applies to state adoptions and not private adoptions (am I making sense?)
Thanks for your help in advance!
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The Adoption Tax Credit applies to both special needs and non-special needs adoptions.
If you adopt a special needs child DOMESTICALLY, you get the full $10,000 credit, regardless of the amount of your qualifying adoption expenses. In other words, even if you adopt through your state and incur almost no expenses, you are eligible for the full $10,000 credit. This was put into the current tax credit law in order to give incentives for the adoption of U.S. born children with special needs. It was also put in, because it was clear that even if people adopting these children incurred few qualifying adoption expenses, they often incurred many other expenses -- such as the cost of customizing a home or vehicle to accommodate a child with a disability.
If you adopt a non-special needs child domestically, or any child internationally, the amount of your credit will be the lesser of $10,000 or the total of your qualifying adoption expenses. In other words, if you had $20,000 in qualifying adoption expenses, you would get the full $10,000 credit. However, if you had only $5,000 in qualifying adoption expenses, you would get only a $5,000 credit. The definition of qualifying expenses is fairly broad, however; as an example, legitimate travel expenses to go overseas to finalize an adoption and bring a child home are counted.
The law has some other things that differ, depending on what type of adoption you have done. As an example, there is a difference between domestic and international adoption with regard to the year in which you can claim the credit. As another example, if an employer gives you an adoption benefit under an adoption assistance program, and you are doing a domestic special needs adoption, you can exclude up to $10,000 of it from taxable income. On the other hand, if an employer gives you an adoption benefit under an adoption assistance program, and you are adopting any other type of adoption, you can exclude it from taxable income up to the lesser of $10,000 or the amount of your qualifying adoption expenses.
Consult your tax advisor, or read the instructions for the 2002 tax credit on the INS website.
Sharon
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