Tax Benefits for Adoption

There are two important tax breaks for those who adopt special needs children: an exclusion of up to $12,170 ($13,360 in 2011) paid under an employee benefit plan that pays for adoption expenses, and a tax credit for up to $12,170 ($13,360 in 2011) for expenses that were not reimbursed by your employer. The $12,170 credit amount also applies for adoptions of children who are U.S. citizens or residents, and are determined to be "special needs children" by a state, even if the actual adoption expenses are less than that.

However, both tax breaks begin to be phased out for those with adjusted gross income (AGI) over $182,520 in 2010 ($185,210 in 2011). If your AGI is $222,520 or more ($225,210 in 2011), you can't claim any tax benefits for adoptions.

For more information, check out the following:

• qualifying expenses for adoption benefits
• dollar limits on adoption expenses
• claiming the adoption exclusion or credit