The total expenses that may be taken as a credit for all tax years with respect to the adoption of a child by the taxpayer will be limited to $10,960 for 2006 and $11,390 for tax year 2007. The credit for the adoption of a special needs child is also $10,960 (in 2006) and $11,390 (in 2007), but this credit exists regardless of the extent to which the taxpayer has any qualified adoption expenses. The credit will begin to phase out at adjusted gross income of $159,450 (2006) or $170,820 (2007) and is completely phased out at $40,000 above this threshold.

Adoption Exclusion:
The amounts of the applicable exclusion for adoption assistance benefits provided by an employer are the same as those for the adoption credit.

Federal Adoption Exclusion:

• Form 8839 for 2006
• Instructions for Form 8839 for 2006
• Tax Benefits for Adoption publication
• Application for Taxpayer ID number for Pending US Adoptions

For general adoption tax credit information, especially as pertains to intercountry adoption, see the Holt International Children's Services website at:

www.holtintl.org/adoption/tax.shtml

For more information regarding the tax credit for special needs adoptions see the article on the North American Council on Adoptable Children website at:

www.nacac.org/pub_taxcredit.html

Additional Federal Resouces:
In addition to the federal adoption tax credit, your state may offer a tax credit or exclusion. Check with your accountant or attorney to determine whether a state tax credit or exclusion may be available to you.

Important Disclaimer:
The information in this page is not intended and should not be relied upon as legal advice. As always, in order to determine whether a tax credit or exclusion is available in any specific situation, you should consult your accountant, attorney, or tax advisor.