Adoption Tax Credit

The 2008 Federal Adoption Tax Credit will be $11,650.

This is for all qualified adoption expenses in the year the family finalizes their adoption. We recommend families consult a tax professional regarding their tax needs.

PLEASE NOTE:
Current tax filing for the 2007 tax season provided for $11,390 adoption tax credit.  We strongly recommend adoptive families consult a legal or tax professional for more details.

What is the Hope For Children Act?
The Hope for Children Act (Public Law 107-16) provides tax credit for “qualifying adoption expenses” to $11,390.(2007)  It also increases the employer adoption assistance exclusion to $10,000.

When did the Federal adoption tax credit go into effect?
The Hope for Children Act is effective January 1, 2002

What are ‘qualified adoption expenses?
According to the IRS: “Reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including meals & lodging) and other expenses related to, and whose principal purpose is for, the legal adoption of an eligible child.”

Who qualifies for the tax credit?
In 2008 persons with modified adjusted gross incomes of $174,730 or less, phasing out for modified adjusted gross incomes up to $214,730.

Do all adoptions qualify for the tax credit?
Non-special needs domestic adoptions and FINALIZED international adoptions qualify.

Overseas adoptions must be finalized in order to be legal and deemed a U.S. citizen.

What about special needs adoptions?
Domestic special needs adoptions are defined as children who are U.S. citizens and determined by the state of residence to qualify for financial subsidy for adoption.

How does the tax credit work for international adoptions?
International adoptions must be finalized. While some adoptions are finalized in the child’s country of birth, state law in the United States governing finalization varies. All states do not recognize “adoption finalization” overseas, requiring families in those states to re-finalize the adoption to qualify for the tax credit.

Can families claim the full credit over multiple years?
Yes, the credit can be applied against tax liability over six years or whenever expenses reach the $11,650 cap (2008), whichever comes first.

PLEASE NOTE:
The IRS states that the 968 Publication will be similar with changes in language to reflect the  $11,650 tax credit (2008).