Adoption Credit Increases for 2010 and 2011

The “health care reform bill” passed by Congress earlier this year increased the credit available for expenses incurred in adopting a child.  For 2010 and 2011, taxpayers can claim a credit of up to $13,170 for adoption expenses.  Allowable expenses include adoption fees, court costs, attorney’s fees and travel expenses,

The bill also changed the credit to make it fully refundable.  In prior years, the adoption credit was non-refundable, meaning it could only reduce your tax liability to $0.  Any unused credit could be carried forward to the next year.  Now, you can claim the whole adoption credit no matter what your tax liability is.

One important note for people who qualify for this credit:  you will NOT be able to e-file your return.  You’ll have to file a paper return and attach documentation relating to the adoption (such as the adoption decree). 

As always, I recommend seeking out a tax professional if you think you qualify for this credit.