I receive a number of questions each week about the Adoption Tax Credit, hence the subject of this blog. The current Adoption Tax Credit will expire on December 31st, 2011. The current Adoption Tax Credit is fully refundable, which means that the taxpayer is fully reimbursed regardless of their tax liability. The amount of the current credit is $13,360 and the full amount is refundable if the child is special needs (almost all children adopted through Florida’s dependency system are considered special needs).
After December 31st, 2011, the Adoption Tax Credit will revert back to the pre-2010 credit amount (which was $12,170 but this number will be adjusted for inflation) and will NOT be refundable. This means, if you do not typically pay taxes, you will not receive the credit. This will remain in effect until December 31st, 2012.
There is an income limit with the credit decreasing for families with an adjusted gross income of $182,520 and the credit is completely eliminated for taxpayers with adjusted gross income of $222,520. You may be eligible to claim the credit even if your adoption does not become final. You must file a paper tax return, the IRS Form (8839) and documentation of the adoption. If you are adopting a special needs child, you must include the state’s determination of special needs.
There are no provisions for ANY Adoption Tax Credit after December 31st, 2012. This of course could change but it will require legislation.