What was the adoption tax credit for 2008

An eligible child is a child with special needs if he or she is a United States citizen or resident and a state determines that the child cannot or should not be returned to his or her parent's home and probably will not be adopted unless assistance is provided. The credit and exclusion for qualifying adoption expenses are each subject to a dollar limit and an income limit. Under the dollar limit the amount of your adoption credit or exclusion is limited for each effort to adopt an eligible child.

If you can take both a credit and an exclusion, this dollar amount applies separately to each. Therefore, it must be reduced by the amount of qualifying expenses taken into account in previous years for the same adoption effort, including an unsuccessful effort to adopt a different child.

The income limit on the adoption credit or exclusion is based on your modified adjusted gross income modified AGI. Generally, if you are married, you must file a joint return to take the adoption credit or exclusion. If your filing status is married filing separately, you can take the credit or exclusion only if you meet special requirements.

The maximum credit is indexed for inflation. Taxpayers may also exclude from income qualified adoption expenses paid or reimbursed by an employer, up to the same limit as the credit. Taxpayers can use the tax credit and the income exclusion but cannot claim the same expenses for both.

This provision is designed to encourage parents to adopt children who would otherwise be hard to place, even if most of the adoption expenses are covered by someone else such as a public foster care program. The adoption credit is available to most adoptive parents, with some exceptions. The credit is not available to taxpayers whose income exceeds certain thresholds.

The thresholds are indexed for inflation. The credit also is not available for adoptions of stepchildren. The adoption tax credit is nonrefundable but can be carried forward for up to five years. The credit is thus of little or no value to low-income families who pay little or no income tax over a period of years. The Patient Protection and Affordable Care Act of made the adoption tax credit refundable for and The result, according to the National Taxpayer Advocate Service, was substantial delays for taxpayers, with 69 percent of all adoption credit claims filed in selected for audit.

The IRS ultimately disallowed only 1. The credit reverted to nonrefundability in The most recent year with data available by adoption type indicates that nearly half of adoptions for which the credit was claimed were for domestic children without special needs, with only 18 percent classified as special needs, and the remainder reflecting international adoptions.

Office of Management and Budget. Table Crandall-Hollick, Margot L. Geen, Rob. George, J. Internal Revenue Service. National Taxpayer Advocate Service. Treasury Inspector General for Tax Administration. Skip to main content. Tax System. Briefing Book Taxes and the Family What is the adoption tax credit?

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