The adoption expeense tax credit was modified and extended as part of the tax bill signed into law by President Bush on June 7, 2001.
Answers are based on IRS and Treasury Department Policy Guidelines.
Q: What does the new law provide?
It provides a tax credit (an amount that can be subtracted directly from the taxes you owe) for expenses incurred in the adoption of a child who is not the child of a taxpayer’s spouse.
Q: What are qualifying expenses?
Reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses, and other expenses directly related to the adoption. You may not claim expenses reimbursed by another source such as an employer adoption benefit. However, as of 2007 you may be able to exclude up to $11,390 from your Adjusted Gross Income for adoption expenses paid by your employer.
Q: How much can I claim?
For domestic adoption the credit is $11,390. It is important to note that even if a domestic adoption does not go through, you can still take the tax credit.
For international adoption the credit is $11,390 but it cannot be claimed if the adoption does not go through. The adoption has to be finalized.
Q: Does the tax credit apply per child or per placement (in case of a sibling group is the family entitled to one or two tax credits?)
The tax credit is per child, not per placement; therefore, a family adoptin siblings would receive a credit for each child.