Three Cheers: Adoption Tax Credit Made Permanent!

There is much yet to analyze about the American Taxpayer Relief Act (“Fiscal Cliff” Bill) passed by Congress last night, but it is clear there’s at least one element orphan advocates can especially cheer:  the Adoption Tax Credit has been saved.

The permanent extension of the Adoption Tax Credit not only guarantees vital financial help for families that choose to adopt.  It also underscores the commitment of the American people to the idea that children need families.

The Adoption Tax Credit was set at $10,000 in 2001 under President Bush and adjusted for inflation going forward.  My best current understanding is that this figure will continue to set the precise value of the credit going forward.  (Thus set at roughly $12,770 in 2013).  The credit will be available to families adopting both domestically and internationally as a credit for qualified adoption expenses.  For special needs adoptions, the credit will be a flat amount (the $10,000 plus inflation) without regard to actual out of pocket expenses.  This means that domestic foster adoptions of children with special needs will be eligible for the full maximum credit even if very little was spent in the adoption process.  Finally, the Credit will also exempt from taxes any adoption benefits provided by employers.  The fact that the Adoption Tax Credit is now permanent means that it won’t need to be renewed every year, as it has in recent years.

The credit begins to phase out at incomes above $190,000.  The Credit is not “refundable”—meaning that it will not result in a payout from the government to those who have no tax liability.  But, the credit can be carried over from year to year if a family isn’t able to claim it all in the first year.

As the recent happenings in Russia highlight, there remain many major challenges in regard to public policy and adoption—from helping countries establish expeditious adoption systems…to guarding against corruption in the process… to support of indigenous adoption efforts.

But today the permanent extension of the Adoption Tax Credit gives advocates for children something to cheer for…and a great start to 2013!