Adoption Tax Credit Extension

Great news for prospective adoptive parents or for those considering adoption! An extension through 2011 of the Adoption Tax Credit was passed as part of the health care reform bill which was signed into law by President Obama on Monday, March 22, 2010. It has been confirmed that it is not part of the current reconciliation and that it will be law until December 31, 2011. The extension raises the maximum credit to $13,170 for tax year 2010.

The Adoption Tax Credit makes adoption a viable option for many families who may otherwise be unable to afford it and helps find permanent homes for more children in the U.S. and internationally. What it means is that adoptive parents may be able to claim a tax credit for qualified adoption expenses on their federal income tax return. A tax credit is typically more valuable than a tax deduction because qualified expenses are subtracted dollar for dollar against one’s tax liability. And, for the first time, the credit was made refundable, so that families with no liability can receive a refund for their qualified expenses from the IRS.

Spence-Chapin is encouraged by the extension but continues to advocate, along with other organizations and adoption agencies, for legislation that will make the Adoption Tax Credit permanent.