If you have a new child in your family, then likely it will mean an additional personal deduction for you. And if that child joined your family through adoption, then you might also qualify for an Adoption Tax Credit.
Let us be clear that this article should not be construed in any way, shape, or form to be tax advice. For that, you need to consult a qualified tax adviser. Don’t think that a social worker can or should give you tax advice. But we do want you to at least have the Adoption Tax Credit on your radar.
Let us give you a little background...
The Adoption Tax Credit has been around since 1997, and at least part of the original intent was to encourage the adoption of children in the U.S. foster care system waiting for an adoptive family. The tax credit has changed over the years, with amounts gradually increasing, and it was even a refundable credit for the 2010 and 2011 tax years. There is also a different process for families adopting a child or children with special needs, which is clearly defined by the Internal Revenue Service and requires, among other things, that the child qualifies for adoption assistance or adoption subsidy funding. Again, it is best to consult your tax professional about this essential requirement.
The Adoption Tax Credit was made permanent as part of the American Taxpayer Relief Act of 2012. It still applies to domestic adoption of an infant, a child who has been in foster care, or to international adoption. However, it still does not apply when a child is adopted by a step-parent. Your tax preparer can help you with how to file and what documentation is needed. There is also information available through the IRS website.
We’ve sometimes heard it questioned whether the Adoption Tax Credit has been helpful. We would say, absolutely. From 2002 through 2012, the number of children waiting in the foster care system and available for adoption has dropped nearly 24 percent. During that period, the number of children adopted in the U.S. has remained relatively stable at just over 50,000 per year. Since 2002, more than half a million children have joined new and permanent families to love and nurture them. They have what every child needs and deserves—a family. Something no child deserves to be without.
So if you adopted a child—or are considering adoption in the near future—be sure to look into how this tax credit might financially support your decision to make a difference in a child’s life.
