There are two tax benefits available to offset the expenses of adopting a child on the federal income tax return. Beginning in 2002, the nonrefundable tax credit for qualified adoption expenses for each child under 18, or a person that is physically and mentally incapable of self-care, is $10,000. (Beginning in 2003, the maximum credit increases to $10,160.) From 1997--2001, the credit was a maximum $5,000 per child ($6,000 for a child with special needs). The credit is phased out for adjusted gross incomes between $150K and $190K.
If your employer has an adoption assistance program and pays or incurs qualified expenses on your behalf, you may be able to exclude from your gross income up to $10,000 of these benefits. An adoption assistance program is a separate written plan set up by an employer to provide adoption assistance to its employees.
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