What is the Adoption Tax Credit?
The Adoption Tax Credit is a federal financial incentive that helps offset the costs associated with adopting a child. It is designed to encourage adoption by providing a tax break to adoptive parents.
Key Features
- Eligibility: The credit is available to families who adopt children, including infants and children with special needs.
- Amount: As of 2023, the maximum adoption credit is $15,950 per child. This amount may vary annually due to inflation adjustments.
- Refundable: If the tax credit exceeds the amount of taxes owed, some families may receive a refund for the remaining balance.
How it Works
The credit is applied on the adoptive parents' tax returns for the year in which the adoption is finalized. Eligible expenses can include adoption fees, legal fees, and travel costs related to the adoption process.
Special Considerations
Families adopting special needs children may receive the full credit even if they didn’t incur qualifying expenses. Additionally, income limits may affect eligibility and the credit amount, which are updated periodically by the IRS.