The adoption tax credit is a topic that is discussed very frequently on adoption forums, among adoptive parents and within adoption agencies. Unfortunately, most of those discussions are due to people’s confusion about the credit and it’s difficult to get straight answers about it unless you’re an accountant or have one who truly understands it. It can be extremely confusing because it is not a tax deduction, that most of us are familiar with. A tax credit works differently and can provide you with some reimbursement of your adoption expenses.

The adoption tax credit is a means to help offset the costs of adoption expenses through your federal tax return. Most expenses are included; agency/lawyer fees, country fees, traveling expenses, court costs, and most other legitimate fees that were related to your adoption process. The way the credit works, is your credit amount is subtracted from your total tax liability. Some people will see a refund thanks to the credit, but a lot depends on your income bracket and your personal tax situation.

Many people wonder if they need to do their taxes any differently now that they will be using the adoption tax credit. My husband and I use Turbo Tax online and had no problems. The program asks you flat out “did you complete an adoption in this year?” When you answer “yes,” it guides you right through it. Be sure that if you are married, you file married filing jointly. Only in special circumstances will returns done as married filing separately be approved.

The good news is that the adoption tax credit was recently increased to $11,390. If your adoption was finalized in 2007 your family will be eligible to claim up to this maximum credit. You can also carry over any unused credit amounts for up to five years. Here is more information about the adoption tax credit direct from the Internal Revenue Service.

photo credit

More Reading:
Adoption is Expensive
Adoption Tax Credit
The Adoption Tax Credit