Tax Benefits for Adoption
As of 1997, two new tax breaks for adoptive parents became available: an exclusion of up to $5,000 paid under an employee benefit plan that pays for adoption expenses, and a tax credit for up to $5,000 for expenses that were not reimbursed by your employer. For either of these tax breaks, the amount is increased to $6,000 for adoptions of children who are U.S. citizens or residents, and are determined to be special needs children by a state.
However, both tax breaks begin to be phased out for those with adjusted gross income (AGI) over $75,000 ($150,000 in 2002). If your AGI is $115,000 or more in 2001, you can't claim any tax benefits for adoptions.
As a result of tax law changes enacted in 2001 that will take effect in 2002, the maximum dollar limits for all of the adoption tax breaks listed above will increase to $10,000 per eligible child. Also, the starting point of the phase-out range will double to $150,000 of AGI.
For more information, check out the following:
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