Adoption Tax Benefits

The Affordable Care Act (health care reform) made the federal adoption tax credit (ATC) refundable for 2010 and 2011 – meaning adoptive families can benefit from the credit even if they do not have tax liability.  Since 2003, families who adopt a child with special needs from foster care can claim a federal adoption tax credit even if they had no adoption expenses.  Children who receive adoption assistance/subsidy are considered children with special needs. Other adoptive families are also eligible for the credit, but must have (and be able to document, if requested by the IRS) qualified adoption expenses.

 

Adoption tax credits carried forward from previous years are also refundable in 2011 and 2012.  This means that most families that adopted foster children who receive adoption assistance between 2005 and 2009, and a few who adopted earlier, should be able to take advantage of the federal adoption tax credit – even if they had no expenses related to the adoption.  The tax credit will no longer be refundable in 2012 and only families adopting special needs children can claim the credit in 2013.  See resources below from the North American Council for Adoptable Children and others for further details.

 

Last modified: January 31, 2012