You may apply up to $14,890 of your adoption expenses toward your federal taxes when you file your taxes, depending upon the year that your adoption was finalized.

When the adoption tax credit is only a credit, you can only get back what you have paid in taxes. This amount can be carried forward for up to 5 years. So if you only pay $4,000 in federal income tax per year, and you adopted in last year, it will take you 3 years in filing taxes before you can recoup all of the tax credit due you.

If you adopt two children, you could have a tax credit for double the amount, assuming that your expenses were that high, and that your tax liability was that high. It is important to note that if your income is too high, you could be phased out of the tax credit. Also, if your income is lower and you receive many tax breaks, you may not be able get the tax credit if you are not paying Federal Income Tax.

If your company has employer-provided adoption assistance, you can receive tax-free income from your job, but there is a limit on the amount. Also, your employer can reduce your salary to pay the adoption benefit so that you can receive tax-free income.  You’ll still need to make sure if you are claiming a credit that you paid expenses equal to that amount, and that you have tax liability.

Read more about employer benefits go to http://adoptivefamilies.com/articles.php?aid=832

Here is what someone said about Wheaton College of Illinois “The model chosen by the college is to provide an equivalent benefit to parents by adoption as they do for biological parents. A parent is a parent and a family is a family! In dollars and cents the adoption benefit is an approximation of the insurance costs for a normal and healthy delivery. That works out to be just $10,320. An additional benefit of the financial benefit is the growing number of adoptive families within the college community.”

The tax credit is phased out for families with a gross adjusted income (AGI) of $194.540 or more, and is completely phased out for those with an AGI of $234,580 or more.

If you adopt domestically and the adoption fails, then you can take the adoption tax-credit the year after your adoption has failed. (No credit can be taken for failed international adoptions.) So if you were in the process of adopting domestically, and spent $7,000 on adoption related fees and birth mother living expenses and the birthmother changed her mind in 2012, you can take the tax credit of $7,000 when you file your taxes. Of course, you have to wait until the next year to receive those funds. Likewise, if you were to enter an adoption in the current year and the birth mother changes her mind, then you cannot claim the lost funds as a tax credit until you file your taxes for the next year.

The special provisions for those adopting children with special needs who pay minimal or no adoption related fees may still be eligible for the tax credit if the adopted children are placed through social services or an agency with a contract with social services.

(Nightlight cannot provide tax advice to your specific situation. This information has been provided in conjunction with attorney John Hine for Greenville, SC. As with all tax matters, consult with a tax attorney or CPA.)

For more information on filing for the adoption tax and other information go to: ABBA Fund: Everything You Want to Know and More About the Adoption Tax Credit by Jason Kovacs. This document has up to the minute information.