Friday, February 23, 2007
Adoption Tax Credit
Adopters may be able to take a tax credit of up to $10,960 in 2006 for qualifying expenses paid to adopt an eligible child. The adoption credit is an amount that you subtract from your tax liability. Qualifying adoption expenses are reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging) while away from home, and other expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. You can't claim expenses that violate state or federal law, or expenses that are for the adoption of your spouse's child or a surrogate parenting arrangement. Your adoption agency expenses would be qualifying expenses.
If the child is a U.S. resident or citizen, you can claim the credit on the expenditures whether or not the adoption becomes final. You only receive a credit for a foreign child in the year the adoption becomes final. For the American child the credit should be claimed in the year following the expenditure if the adoption is not finalized and the final-year adoption expenses in that year as well.
The amount of your adoption credit or exclusion is limited to $10,960 for each effort to adopt an eligible child. For this purpose, an attempt that leads to the successful adoption of a child and any unsuccessful attempt to adopt a different child are treated as one effort.