Adoption Tax Credit

Without doubt the decision to adopt can be one of the most exciting and life-transforming decisions that you may ever take. However, along with the stress of choosing a good adoption agency and attorney, selecting the child and then of going through the entire legal process, there is one more challenging aspect to adoption. And that is of the financial burden it can put on you. You not only have to pay the fees of the agency and the attorney but also cover all the costs of traveling, home study, visa and much more. Of course, you might say that the joy of having a child of your own outweighs the financial costs. Sure, but would it not be nice if you could find some way to defray some of the adoption costs.
Help is at hand. The Adoption Tax Credit is one of the most valuable funding options open to parents wishing to adopt. However, one needs to understand what exactly the provisions are, who qualifies and how this credit system work.

• First of all, contrary to common perception, this credit applies to both domestic and international adoptions. The only difference is as follows. In the case of a domestic adoption, you can claim credit even if the process is still ongoing and the adoption has not been finalized. But, in the case of an international adoption, you can apply for the credit only after all the formalities have been completed and the adoption finalized.
• To be eligible for the tax credit, an adopting family must have adopted a child, legally eligible for adoption and then paid all the expenses for which credit is being claimed.
• The adoption expenses that will be considered valid and due for credit are the actual adoption fees paid to any agency, legal fees, travel, lodging and boarding expenses, home study expenses and so on. Of course, you have to be able to prove that these are all reasonable and necessary. The best thing to do before you claim any of these expenses is to sit down with a tax expert and carefully go through all your expense to understand what can be claimed as necessary expenses towards the adoption.
• Expenses that are being funded or reimbursed by programs such as employee benefit program or other funding agencies will not qualify for the tax credit.
• Many states nowadays offer the Adoption Tax Credit to the extent of $12000 in some cases. For example, suppose you incurred adoption expense of $10000 and your total tax liability is $13000, then your liability will be reduce by $10000 to just $3000.

It is therefore very important that all prospective adoptive parents consult their accountant or a tax expert to understand whether their state offers the Adoption Tax Credit, how they can determine their eligibility and what they need to do to ensure that they can avail of this Tax Credit. Parents who benefit from this tax credit can use the money towards building their child’s future.