If you are considering adopting a child, you may qualify for the adoption tax credit, which is up to $13,170 per child.

In order to qualify, you must have adopted a child and paid out-of-pocket expenses relating to the adoption. The amount of the tax credit is depended on the amount you spent on adoption-related expenses. If you adopt a special needs child you are entitled to claim the full amount of the adoption credit even if you didn't spend the full $13,170.

The adoption credit was scheduled to expire at the end of 2010 until health care legislation passed and extended it through tax year 2011. This is one of the many favorable tax law changes for 2011.

For higher income earners, the phase out for the credit starts at $180,000. To be eligible for the credit you must adopt a child 17 or younger. Or a child of any age who is a US citizen or resident alien and who is physically or mentally unable to care for himself or herself.

Many argue the issues with the tax credit, is that you had to spend that money out of pocket before you can claim the credit. If the credit is based off expenses you have already spent it is difficult for lower-income families to adopt.

Qualified adoption expenses include: adoption fees, attorney fees, court costs, travel expenses and re-adoption expenses related to the adoption of a foreign child.

Qualified adoption expenses that do not qualify include:

  • those for which you received funds under any state, local, or federal program
  • that violate state or federal law (that wouldn't be a good way to start parenthood by the way)
  • for carrying out a surrogate parenting arrangement
  • for the adoption of your spouse's child (Child Swap to get the tax credit?!?!)
  • paid or reimbursed by your employer or any other person or organization (think you can carry a double paycheck?)
  • or allowed as a credit or deduction under any other provision of federal income tax law.

If you need to know more specific details, check out IRS Pub 8839 or stop on in to see a local Liberty Income Tax professional!

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.