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Adoption Tax Credit for 2017

January 23, 2018

The planners amongst us have started to think about filing taxes and are asking questions about the Adoption Tax Credit for 2017. The information in this blog is for your 2017 taxes, which are filed by April 15, 2018.

Amount of the Adoption Tax Credit for 2017

The IRS has adjusted the Adoption Tax Credit for 2017 to $13,570 per child.  This is a tax credit, which means that it is a dollar for dollar reduction in the amount of federal taxes that you owe. If you owe less than $13,570 in federal taxes you can carry the credit over for up to five years in order to use the full credit.

Status of the Adoption Tax Credit in the 2017 Federal Tax Bills

Thanks to some great lobbying this fall and grassroots support by adoptive parents, the Adoption Tax Credit survived the tax overall that is making its way through Congress. The Adoption Tax Credit was restored by Committee in House Tax Reform Bill, and was preserved in Senate Tax Reform Bill.

Does Your Income Affect How Much Adoption Tax Credit You Can Claim?

Adoptive parents whose modified adjusted gross incomes are more than $243,540 cannot claim the Adoption Tax Credit for 2017. Partial credit is allowed for those with incomes between $203,540 and $243,540.

Adoption Tax Credit 2017 for Special Needs Adoptions

Parents who have adopted a child with special needs can claim the full Adoption Tax Credit of $13,570 on their 2017 taxes regardless whether they have incurred any expenses for their adoption. For the purposes of the Adoption Tax Credit for 2017 in order to qualify as a special needs adoption, the child must receive adoption assistance or adoption subsidy benefits from the state, which could include monthly payments, Medicaid, or reimbursement of nonrecurring expenses.

Special need adoptions for purposes of the Adoption Tax Credit for 2017 does not include children with physical or emotional disabilities who were adopted internationally or were adopted domestically without a state adoption assistance/subsidy. This does not mean that these families cannot utilize the Adoption Tax Credit for 2017, but in order to claim the credit, they must have incurred qualified adoption expenses.

State Adoption Tax Benefits

Keep in mind that some states also provide tax benefits for adopting families. You may well be eligible for both the federal and state adoption credits, but since each state is different, you will need to check with a tax professional in your state.

Credit: Creating  A Family