Adoption Tax Credit Law and Legal Definition

An adoption tax credit is federal and state tax credit offered to adoptive parents to encourage adoption. Such credits reduce taxes owed by parents who adopt to help settle some of the costs associated with adoption. The amount may depend on family income and other adoption benefits.

Pursuant to section 36C of the United States Internal Revenue code, a credit is offered for “qualified adoption expenses” paid or incurred by individual taxpayers. The credit is now refundable as of 2010, due to changes included in the Health Care and Education Reconciliation Act of 2010.

A person qualifies for the adoption tax credit if s/he adopted a child and paid out-of-pocket expenses relating to the adoption. The amount of the tax credit is directly proportional to the adoption-related expenses. If you adopt a special needs child, however, you are entitled to claim the full amount of the adoption credit, even if your out-of-pocket expenses are less than the tax credit amount.

The adoption credit is calculated on Form 8839 Qualified Adoption Expenses .