- The bill to avert the fiscal cliff, signed on January 2, 2013, made the adoption tax credit permanent, extending the credit as it was in the 2001 Economic Growth and Tax Relief Reconciliation Act. Please read our press release on the legislation.
- The credit will remain flat for special needs adoptions, which means that people who adopt children who are determined to be special needs (or hard to place) by a state or county child welfare agency can claim the maximum credit regardless of their expenses.
- The adoption credit is not refundable for 2012 and beyond, which means that only those individuals with tax liability will benefit.
- In current discussions about tax reform, some members of Congress have talked about eliminating the adoption tax credit altogether.
History of the Credit
- Since its introduction in 1997, the adoption tax credit has historically been a non-partisan issue widely supported by Congress, and available in some form every year.
- The adoption tax credit is available for eligible families that adopt through foster care, intercountry adoption, and private domestic adoption.
- Over time, the rules of the credit have changed. The requirements for determining families’ eligibility have changed, those adopting children with special needs became eligible to claim the credit without expenses, and the amount of the credit has increased. Before 2010, the credit could be carried forward over multiple years, and in 2010 and 2011 the credit was made refundable, allowing families to receive the full benefit during a single tax year regardless of taxes due that year. The credit was only refundable for 2010 and 2011.
- The credit has always been extended or amended as a part of other pieces of legislation, including the Small Business Job Protection Act of 1996, the Economic Growth and Tax Relief Reconciliation Act in 2001, the Health Care and Education Reconciliation Act in 2010, and the Tax Relief Act at the end of 2010.
- The credit was made permanent for the first time through the American Taxpayer Relief Act of 2012. Unfortunately, Congress did not extend the refundable provision, which limits or eliminates the availability of the credit to lower- or moderate-income families (because they do not have tax liability).