Tax benefits of adoption
Adoptive Families may be eligible for federal income tax credits that help offset the cost of the adoption. Adoptive Families may claim a $10,000 tax credit for qualifying adoption expenses. Effective January 1, 2002, the Adoption Tax Credit for all adoptions will double from $5,000 to $10,000. Additionally, the revision also increases the earning limit which one can claim the full credit from $75,000 to $150,000. Overview of the adoption tax law amendment includes increasing the Adoption Tax Credit to $10,000 for all adoptions; allowing a $10,000 tax credit for the adoption of special needs children (beginning 2003); allowing the Adoption Tax Credit to be taken against the alternative minimum tax; and increasing the income amount phase-out range from $75,000 to $150,000 – $190,000.
The TDPRS has an adoption assistance programs which is available to Families who adopt certain Children with special needs to help offset some of the costs of supporting and legally adopting these Children. Assistance is available to help with the Child’s medical and financial needs. The Child and placement must meet certain eligibility requirements to receive adoption assistance. At the time of the adoptive placement, the Child must have been six years of age or older, two years of age or older and a member of a minority group, member of a sibling group being placed together for adoption or have a diagnosed handicapping condition. The adoption assistance agreement must be entered into and signed before the adoption is legally complete.
The non-recurring adoption expenses program provides a one-time payment to reimburse Adoptive Families for some of the costs of legally adopting children with special needs. A Family’s expenses may be covered as much as $1,500 for each child with special needs. Receipts are necessary to determine reimbursement. Reimbursement is only made after the adoption is completed by the court.
If you have questions regarding adoption tax benefits, please contact our tax professional.