I know many folks are starting to at least think about their taxes this time of year so I wanted to share some information on the adoption tax credit.
The current amount of the credit is $12,150 according to IRS.gov. The credit can be used over a period of five years and can first be used during the year the adoption was finalized. Special needs adoptions may use the full amount of the credit, regardless of expenses.
What many do not know is that this is NOT a permanent feature of the tax code. If this provision is not renewed by December 31st, 2010 (yes, this year!), the amount of the credit will decrease to $6,000 for special needs adoptions and zero for non-special needs adoptions.
There are a number of bills pending in the legislature to renew the credit. In addition to renewing the credit, the bills provide the following various provisions: 1) allow adoption expenses to be claimed the year they are incurred; 2) make withdrawals from retirement accounts penalty free when using funds to pay for an adoption; 3) $2,000 credit for adoption a child 9 and over (each year); and 4) proposed cap of $200,000 income for those receiving the credit.
It is unknown at this time which, if any, of these provisions will become law. You can follow me on Facebook or Twitter as I will post updates throughout the year.