Financing Your Adoption: The Adoption Tax Credit

Parents who finalized an adoption in 2007 may qualify for a maximum adoption tax credit of $11,390 for adoption expenses on their federal income tax returns. The credit begins to phase out if you have a modified adjusted gross income of $170,820 or more and is completely phased out if you have a modified adjusted gross income of $210,820 or more.

Families who have experienced a disrupted adoption (an adoption situation that did not end in a completed adoption) may also benefit from the adoption tax credit. Any family that qualifies for the adoption tax credit may also deduct qualifying adoption expenses from a disrupted adoption. However, families must wait one year before filing for the credit.

For adoptions finalized in 2008, the tax credit has risen to $11,650. The 2008 credit will begin to phase out with a modified adjusted gross income of $174,730 and will completely phase out at a modified adjusted gross income of $214,730 or more.

To learn more about the adoption tax credit, visit http://www.irs.gov/taxtopics/tc607.html.