Q: Did Congress double the adoption tax credit?
A: Yes. The new adoption tax credit signed into law in June doubles from $5,000 to $10,000 per child the amount of money adoptive parents may credit on their federal taxes owed effective January 1, 2002. As one of the chief congressional negotiators on the largest package of tax cuts in 20 years, I strongly supported the efforts to substantially increase the financial incentives available through the federal tax code to encourage more adoptions in America. It sends the right message to society. The adoption tax credit opens the door for prospective parents to adopt a child by giving them the means to afford the often costly legal, traveling, and other fees associated with an adoption. Adoption costs can run into the tens of thousands of dollars. Doubling the federal tax credit may help encourage more people to adopt by giving prospective parents the opportunity to defray these substantial costs. As a matter of public policy, we need to encourage families who are willing to open their hearts to children who need a home. Now, more prospective parents will be able to take advantage of this pro-family tax credit. The income cap at which the credit begins to phase out was doubled from $75,000 to $150,000 (adjusted gross income). Plus, adoptive parents may spread out the new $10,000 tax credit over a five-year period.
Q: What other changes were made to the adoption tax credit?
A: The refundable $10,000 tax credit also includes adoptions for special-needs children. And effective January 1, 2003, the new law cuts some strings previously attached to special-needs adoptions. It will allow for the credit to be applied in the year the adoption is finalized and expand eligibility beyond adoption fees to help defray the costs for special services or equipment the adopted child may need. Other changes include an exemption from the Alternative Minimum Tax and a permanent extension and doubling of the income tax exclusion to $10,000 allowed for employer-provided adoption benefits. Policy makers from both sides of the aisle widely agree on the philosophical, political, and social merits that come from using the tax code to foster more adoptions. As a pro-life member of Congress, I support policies like the adoption tax credit that discourage abortion, build stronger families and enhance the opportunity for every child in America to grow up in a stable, loving home environment. Prospective parents also should know the adoption tax credit was made a permanent part of the federal tax code and includes domestic foster care, private and overseas adoptions under the landmark tax relief legislation I helped write into law.