A Beautiful Choice, Inc.

Helping make families through the beautiful choice of adoption


Congress recently passed a bill to avert the "fiscal cliff," with the bill signed on January 2, 2013. The bill made the adoption tax credit permanent.

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. The credit applies to all types of adoption (except stepparent adoption), including international, domestic private, and public foster care. Since 2003, families who adopted children with special needs could claim the maximum credit regardless of their qualified adoption expenses. The credit has made adoption a more viable option for many parents who might not otherwise have been able to afford adoption, allowing them to provide children with loving, permanent families.

What is the current status of the adoption tax credit?

The legislation to avoid the fiscal cliff (the American Taxpayer Relief Act of 2012, signed into law on January 2, 2013) included a provision that made the adoption tax credit permanent. It did not make the adoption credit refundable, so it will only benefit those adoptive families who have federal income tax liability.

The credit is still "flat" for special needs adoptions, meaning families who adopt a child with special needs do not need to document qualified adoption expenses.

What does it mean that the adoption tax credit is permanent? 

A permanent tax credit is one that was extended without a specific expiration or set date. Congress can still choose to make changes to the credit in future legislation.

What is the maximum amount of the credit for 2013? At what income level does the credit begin to phase out?

For 2014, the maximum adoption credit and exclusion $12,970 per child. The credit will begin to phase out for families with modified adjusted gross incomes above $194,580 and the credit will go away completely for those with incomes around $234,580. Since the credit is per child, the maximum you claim depends on the number of children you adopt. If you adopt two children in 2013, your maximum is $12,970 x 2 or $25,940. If you adopt four children, the maximum is $12,970 x 4 or $51,880. For purposes of the tax credit, there is no limitation on the number of children you can adopt.