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Federal Adoption Tax Credit


As of January 1, 2011, the adoption tax credit is $13,360.  Consequently, “qualified adoption expenses” up to $13,360 may be taken as a credit.  “Qualified adoption expenses” include reasonable and necessary expenses for adoption including court costs, lawyer fees, agency expense and other expenses directly related to the legal adoption of an eligible child.  It does not include birth mother living expenses. 

Under the new law, the tax credit is refundable.  Eligible taxpayers can receive the credit even if they do not owe income tax for the year of filing.  The tax credit may also be used for an unsuccessful adoption.  For 2011, the tax credit amount is phased down if the taxpayer’s modified adjusted gross income is between $185,210 and $225,210.  The credit disappears at $225,210.

If a taxpayer’s employer has an adoption assistance program, the maximum amount payable under the assistance program has been raised to $13,360. 

The adoption tax credit is not available for any employer reimbursed expense.  If the employer does contribute to taxpayer’s adoption expenses, taxpayer must check to see what amount can be excluded from his gross income. 

In order to claim the adoption tax credit, it will be necessary to file a paper return and supply evidence of the completed adoption.  No electronic filing is permitted.  Adoption evidence may include for a finalized domestic adoption, the adoption decree.  If the domestic adoption is not final, one of the following documents is needed:

1.      An adoption taxpayer identification number for the child, or

2.      A home study completed by an authorized placement agency, or

3.      A placement agreement with an authorized placement agency, or

4.      A document signed by a hospital official authorizing the release of a newborn child from the hospital to the taxpayer for legal adoption, or

5.      A court document ordering or approving the placement of a child with the taxpayer for adoption, or

6.      An original affidavit or notarized statement signed under penalties of perjury from an adoption attorney, government official or other person stating that the signor placed or is placing the child with taxpayer for legal adoption, or is facilitating the adoption process for the taxpayer in an official capacity.

X:FormsAAdoptionTaxFederal Adoption Tax Credit effective 2011.doc

Grady, Hayes & Neary, LLC
N14W23777 Stone Ridge Drive Suite 200
Waukesha, WI 53188
Phone Number:(262) 347-2001