- Our Services
- For Families
- For Professionals
- Join the Conversation
- Meet the Children
Congress Makes Adoption Tax Credit Permanent
The Adoption Tax Credit that was set to expire at the end of 2012 is now a permanent credit. The tax credit allows adoptive parents of children from foster care to reduce the amount they owe in federal income taxes. In the case of an adoption of a U.S. child that a State has determined has special needs, you may be eligible for the maximum amount of credit even if you paid no qualified adoption expenses.
“As the 112th Congress came to a close, we secured several victories to help improve the lives of children living in the U.S. and around the world,” said U.S. Senator Mary Landrieu of Louisiana in an email sent on January 4 to adoption advocates. “The adoption tax credit, which I have long supported, was made permanent as part of the deal to avoid the fiscal cliff. Every child deserves a protective, loving family, and I hope that a permanent Adoption Tax Credit will enable many more families to open their hearts and homes to a child in need.”
What the Adoption Tax Credit Means for You
An adoptive family can apply this credit toward their federal tax liability, meaning it can reduce what they owe in federal income taxes for the year. Effective 2012 it is not a refundable tax credit, and cannot increase the amount of your refund if you do not owe any federal income tax.
Most adoptions from U.S. foster care qualify for the maximum amount of the credit even if no qualified adoption expenses occurred, such as necessary adoption fees, court costs, attorney fees, traveling expenses (including meals and lodging while away from home), and other expenses directly related to the legal adoption of an eligible child. If the State or County provides adoption assistance, that is proof that the child was determined to be special needs.
The Internal Revenue Service (IRS) has more information and required forms for claiming the adoption tax credit. Below is information from the IRS about filing for the credit this year:
- The credit is no longer a refundable credit. It can, however, reduce an individual’s taxes by up to $12,650. Any credit that exceeds what is owed may be carried forward.
- If the taxpayer’s modified adjusted gross income is more than $189,710, their credit is reduced. If their modified AGI is $229,710 or more, they cannot take the credit.
- Taxpayers who plan to claim the adoption credit will not be able to file their return until late February or early March. The IRS is still updating their computer systems due to the late legislation. An announcement will be placed on IRS.gov when the Service is able to process the form.
- The Form 1040 federal tax return and the Form 8839, Qualified Adoption Expenses, must still be mailed to the IRS. The Service was unable to convert the Form 8839 to an electronic format this year.
You can also find more information about the Adoption Tax Credit on the following websites: