Adoption Tax Credit

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President Obama Passes Legislation to Permanently Extend Adoption Tax Credit

On January 1, 2013, Congress passed the American Taxpayer Relief Act of 2012 (H.R. 8). Amongst the provisions of this Act was an extension of the adoption tax credit in which President Obama signed into law Wednesday, January 2, 2013.

What is the Adoption Tax Credit?

The adoption tax credit, which can be claimed for eligible adoption-related expenses, has helped thousands of American families offset the high cost of adoption since the credit was established in 1997. It has made adoption a financially viable option for many parents who might not otherwise have been able to afford adoption, allowing them to provide children with loving, permanent families. With over 100,000 children in the U.S. foster care system currently eligible for adoption, and an ever increasing number of orphaned and abandoned children worldwide languishing in institutions, the continuation of the adoption tax credit is vital to providing love, safety, and permanency through adoption to as many children as possible.

History of the Adoption Tax Credit

  • Although several different bills have been introduced to establish the adoption tax credit or make it a permanent part of the U.S. tax code, Congress has never passed legislation specific to the credit itself. Instead, the adoption tax credit has been extended every year since its initial passage as part of the Small Business Job Protection Act of 1996.
  • The Small Business Job Protection Act established a nonrefundable maximum tax credit of $6,000 for parents that had adopted children with special needs, and a nonrefundable tax credit of $5,000 for all other adoptive parents, both of which went into effect in 1997. The $5,000 non-special needs adoption tax credit for eligible income-qualifying parents was set to expire on December 31, 2001.
  • In 2001, Congress passed the Economic Growth and Tax Relief Reconciliation Act, which raised the adoption tax credit to $10,000 for all adoptions, indexed the maximum allowable credit for inflation, and made the credit for special needs adoptions permanent. The tax credit for non-special needs adoptions was set to expire on December 31, 2010.
  • In March 2010, the adoption tax credit was included in the Health Care and Education Reconciliation Act (an act amending the Patient Protection and Affordable Care Act), delaying its sunset until December 31, 2011. This increased the maximum credit (indexed for inflation) to $13,170 per eligible child and also made the credit refundable for tax years 2010 and 2011, which allowed families to receive the full benefit during a single tax year regardless of taxes due that year.
  • In December 2010, the Tax Relief Act extended the adoption tax credit through tax year 2012; for this year, the credit is once again nonrefundable.
  • The current maximum allowable adoption tax credit is $13,360, and is set to sunset on December 31, 2012. If it is allowed to expire, the law will revert back to a maximum tax credit of $6,000 for parents adopting children with special needs. There will be no adoption tax credit available for all other adoptive parents.

Save the Adoption Tax Credit News

Adoption Tax Credit News from the IRS

posted February 21, 2012

Many taxpayers claiming the expanded adoption credit are slowing down their refund by not attaching required documents to their tax returns.  Ensure you know what you need to do to get the Adoption Tax Credit to which you are entitled.  To find out more on requirements and other important information go to, key word "Adoption Credit."

The Affordable Care Act raised the maximum adoption credit to $13,360 per child for tax year 2011. The credit is refundable; you may be eligible even if no tax is owed for the year.

The Adoption Tax Credit is based on reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses. The amount of the credit could be limited by your client's income.

In addition to filling out Form 8839, Qualified Adoption Expenses, eligible taxpayers must include with their 2011 tax returns one or more adoption-related documents. Use this chart or refer to the Instructions for Form 8839 for a list of acceptable documents. This documentation requirement, designed to ensure that taxpayers properly claim the credit, means taxpayers claiming the credit will have to file paper tax returns.

If you adopted a child with special needs, you may qualify for the full amount of the Adoption Tax Credit even if you paid few or no adoption-related expenses. If claiming the credit for a special needs final adoption, you only needsto submit the final adoption order or decree and the state’s determination of special needs or subsidy agreement.

It could take up to three weeks to get a refund, even with proper documentation attached to the return.

Families claiming the credit can still use IRS Free File to prepare their 2011 tax return and Form 8839, but the tax return and Form 8839 must be printed and mailed to the IRS, along with all adoption credit-related documents.




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America's Christian Credit Union (ACCU) believes every child deserves a forever family. Their adoption loan program has helped place over 1,000 children in loving homes. In addition to adoption loans, ACCU provides effective banking solutions to individuals and ministries that empower them to reach their financial goals while expanding God's Kingdom. Click here to read more >>