The Adoption Tax Credit

  • Robert S. Thomas,
  •   Taxation
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Expanding your family through adoption can be an incredibly exciting and fulfilling experience. People simply want to expand their families and experience the joy of parenting. Further, there are many children in the world waiting for the opportunity of a permanent, loving family. In fact, it is estimated that 135,000 children are adopted every year in the country through private adoption, from foster care, and from other countries.

As wonderful as the prospect of adoption can be, there is also the sobering reality of how much it actually costs to adopt a child. For a domestic private adoption, prospective parents can expect to pay $40,000 to $50,000 in various fees and expenses from beginning to adoption consummation. For international adoption, costs can start at $30,000 and dramatically increase depending on the child’s country of origin. These costs are prohibitively high for many families.

The Adoption Tax Credit

In 1996, Congress enacted the adoption tax credit, aimed at easing the costs of adoption by reducing a families tax liability. The tax credit is non-refundable, meaning that it will offset tax liability, but cannot be paid to you in a tax refund. However, this credit can be carried forward for up to five years, or when it is exhausted. For 2016, the maximum tax credit that a family can claim is $13,460.

The adoption tax credit specifically covers “qualified adoption expenses”, which include “reasonable and necessary adoption fees, court costs, attorney fees, and other expenses” that are directly related to the legal adoption of an eligible child.

Taxpayers who are adopting a child domestically can report the credit in the year after an expense is occurred, and expenses incurred during the year when the adoption is consummated can be reported in that same year. In addition, domestic taxpayers whose adoptions failed can still claim a tax credit the year after incurring the expenses.

The rules are a little different for international adoptions. For international adoptions, all expenses incurred for a successful adoption can only be claimed in the year that the adoption is consummated. In contrast, if an international adoption is unsuccessful, the taxpayer is not entitled to take any tax credit.

A Tax Attorney Can Help You

Expanding your family is a big deal. It is also incredibly expensive. You therefore need all the help you can get. Call the Law Offices of Robert S. Thomas. For over two decades, I have provided legal tax advice and representation to individuals and businesses who want to maximize their tax advantages. Let me help you. I have a Master of Law Degree (LLM) in Taxation, and a license to practice in the United States Tax Court. Call me today at 847-392-5893 for an initial consultation or visit our website today.

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