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Adoption Tax Credit in 2015

Thu 5 Feb, 2015 / by / Adoption

For our firm December can be a busy month in adoption work. This was because traditionally no guarantee existed that Congress would renew or re-enact the Adoption Tax Credit, a federal benefit, in the following year. Many would hasten to complete their adoption before the new year to ensure they receive the tax credit. And it’s no small potatoes, often giving people some $13,000 dollars back as a credit. Although there now exists an assurance that the tax credit is here to stay, its terms and eligibility requirements still change each year.

For 2015, we know the figures. The maximum credit allowed will be $13,400. For people adopting special needs children (often these are children adopted out of foster care, and in other cases, those children who meet one of a set of criteria defined by Illinois), they will automatically receive a full credit of $13,400. For others, such as people completing private adoptions, this amount will be the maximum; as in prior years, people completing private adoptions will still have to prove their expenses, and they get a credit for the amount of qualified expenses.

For example, a couple who spends $2,500 on agency fees for a home study, $900 in assistance to a birth parent for expenses during a pregnancy, another $1,000 in travel expenses to complete the adoption, and $3,500 in attorney fees would receive $7,900 in federal credits based upon the total of these qualified expenses. For a contrasting example, a couple who spends $9,000 in agency fees, $2,000 for travel to another country, and $4,000 in attorney fees would simply be capped at $13,400 because their expenses would exceed that amount.

Lastly, for households with higher incomes, the credit begins to phase out when household income is greater than $201,010 and completely phased out at household incomes of $241,010 or more.

Obviously this is important news for anyone seeking to adopt in 2015. The credit can make a huge difference in budgeting and decision-making.

The IRS explained this news in a bulletin, 2014-47, and this information will be included in the new version of the federal law for the credit, 26 U.S.C. § 23.

*Photo credit (above pie chart): By the Congressional Coalition on Adoption Institute