Adoption Tax Credit

Adoption is a very pricey undertaking that a couple or family could ever take. Because of this, thousands of couples out there who wish to adopt tend to back out from their adoption plans and rather stay hopeless of owning a child whom they can call as their own. To make these couples happy, certain Acts were created to make adoption affordable, and perhaps one of the most well-known financial assistance ever created was the Adoption Tax Credit.

The Adoption Tax Credit is in the first place a tax law provision that is deemed only applicable to the middle income families. It is complicated though, but many have agreed that it is a valuable benefit for families and couples who wish to adopt.

On the most basic, the Adoption Tax Credit is an amount subtracted from your tax liability. It was developed and made available for adopting families for the year following the year in which the expenses are paid. So it then follows that the taxpayer who paid the qualifying overheads in the current year for certain adoption purposes may then be entitled to claim the adoption tax credit on the current year return. It is important, however, to note that the adoption tax credit is not considered available for any of the refunded costs.

What the Adoption Tax Credit Covers?

To fully understand the nature of the Adoption Tax Credit law, it is wise to know what this financial aid covers and how it works with the other incentives like the most known benefits for employer-paid adoption. Note and understand the following:

In general, the adoption tax credit applies to both domestic and international adoptions. However, the procedure involved in these two main forms of adoption largely differs. On one hand, the adoption tax credit for the international adoptions can be claimed only after the adoption has been finalized. On the other hand, the adoption tax credit for domestic adoptions can be claimed regardless of the fact that the adoption does not go through the finalization process.
The adoption tax credit law mandates that the amount of about $10,630 is applicable per child, but not per year. This means that even if the taxpayer claims costs paid out over more than a year for a particular adoption, the total credit that he or she is entitled remains $10,630.
The adoption tax credit law highlights the availability of full credit. However, the full credit is not available for international adoptions. It is only entitled for the domestic special needs adoption even if the qualifying overheads failed to reach that limit.

Qualification of Adoption Expenses and Eligibility of Children

To be able to claim the adoption tax credit, the adoptee should make his or her expenses qualified for the credit. Under the tax code, it is defined that the qualified expenses are those that are reasonable and necessary, as well as those that are associated directly to the legal adoption of an eligible child. This mainly includes the attorney fees, court costs, and the traveling overheads.

Speaking of eligible child, the adoption tax credit law holds that children who are eligible to the credit are those that are under the age of 18, or those who are mentally and physically incapable of caring for themselves. Aside from this, there are certain adoption tax credit rules available for children who have special needs, or those who are US citizens or residents, who cannot be returned to their parents’ residence, and those who are probably will not be available for adoption with the absence of assistance due to certain conditions or factors.