Who can claim the adoption credit?

A taxpayer who adopts an eligible child can claim a tax credit up to $10,000 per child for qualified adoption expenses, plus cost-of-living adjustments.

An “eligible child” includes any person who is under age 18, is physically or mentally incapable of self care or is a special needs child (as defined by the IRS). There are special rules for foreign adoptions.

“Qualified adoption expenses” include adoption fees, attorney fees, court costs, travel expenses (including meals and lodging) or other expenses directly related to, and for the principal purpose of, the legal adoption.

Qualified adoption expenses do not include step-child adoption expenses. Adoption expenses reimbursed under an employer benefit program are also not qualified expenses, except for a special needs child.

Typically, the adoption credit is claimed in the year the adoption becomes final and is reduced for taxpayers with certain adjusted gross incomes.

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