Special Needs – A U.S. adoption in which the state or county child welfare agency has determined that the child is not likely to be adopted unless the government provides assistance to the adoptive family. The special needs determination is almost exclusively for foster children.
Tax Liability – The amount of federal income tax you owe. Your applicable tax rate is determined according to your taxable income and can be found in the IRS tax tables.
Refundable Credit – A tax credit that is treated as a payment thus can be refunded to the taxpayer regardless of tax liability.
Non-Refundable Credit – A credit that reduces the taxes owed.
Flat Credit – “Flat” for special needs adoptions means that people who adopt children who are determined to be special needs (see above) by a state or county child welfare agency can claim the maximum credit regardless of their expenses.
Qualified Adoption Expenses – Necessary costs associated with the adoption, including court costs, attorney fees, travel expenses (meals/lodging), and other direct expenses related to the legal adoption.