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Adoption Credit and Adoption Assistance Programs

For taxpayers who adopted an eligible child, an adoption tax credit and exclusion are available to help compensate for qualified adoption expenses.

You may be able to receive an outright tax credit for qualified adoption expenses. Beginning in 2010 the adoption credit is refundable; for prior years, the credit exists but it cannot result in a refund.

In addition to the credit, you may also be able to exclude from your gross income qualified adoption expenses paid by you, or paid for you by your employer. This exclusion will decrease the amount of income on which you are taxed.

Both the adoption tax credit and the exclusion offer financial assistance for qualified expenses, which include reasonable and necessary adoption fees, court costs, attorney fees, travel expenses (including meals and lodgings while away from home), and other expenses directly related to the adoption.

While you can claim both the credit and the exclusion for the same adoption, you cannot claim them both for the same expenses.

For 2011 a limit of $13,360 applies separately to both the credit and the exclusion for each effort to adopt a child.