Adoptive parents may be worried that their decision to adopt may provide them the blessings of parenting a child, but may also leave them destitute in the process. To their benefit, though, the U.S. Federal Government provides a tax credit for adoption. While the adoptive couple may be the ones applying for the adoption tax credit, eligibility for this benefit from the Internal Revenue Service comes not from their status, but from the needs of the child.
In assessing the viability of kids for adoption tax credits, there are two basic criteria. An adopted child must be less than 18 years of age and/or he or she must be unable to take care of himself/herself (this situation often manifests itself for children with special needs, who may be able to receive additional benefits and for whom the maximum age may be extended).
The adoption tax credit is designed for expenses that are directly incurred from securing kids for adoption. Therefore, these costs, known officially as “eligible expenses”, are of the kind that adoptive parents will likely be unable to avoid. Agency fees, court costs, the price of an attorney (within reason), and even travel expenses may be reimbursed by the provisions of the tax credit.
The tax credit for bringing in kids for adoption may be claimed by adoptive parents for different points in the adoption process. For pre-adoption expenses, the credit is taken the following year. As for costs in the year of finalization and post-adoption fees in a subsequent year, credit is awarded that same year.
It should be noted that there is a maximum amount of money available from the IRS for the adoption tax credit to be applied to a family’s sum total of taxes. It also must be stressed that even after government assistance and other benefits, some expenses may still need to be covered out of pocket.