Are you adopting this year? That’s a big deal: it’s a huge life and financial commitment. From the perspective of an accountant, adoption may qualify you for a special tax credit. Tax credits are even more important than a tax deduction because they’re a dollar-for-dollar reduction in the taxes that you pay.
The maximum possible savings of the credit is $13,570 (per child, but we’re assuming that you aren’t Angelina Jolie) on your 2017 taxes, based on the expenses you pay during the process of adopting a child.
The credit begins to phase-out when your 2017 modified adjusted gross income (MAGI) reaches $203,540. When you reach $243,540, it drops down to zero.
The credit is usually based on the amount of out-of-pocket expenses that you pay during the adoption, such as adoption fees, attorney fees, court costs, and even meals and lodging for travel you need to make during the adoption. If you are adopting a special needs child and qualify for the credit you get to claim the whole $13,570 no matter what the actual costs incurred were.
Although the credit is available for both domestic and international adoptions, you can claim the credit for domestic adoptions even if your attempt to adopt was unsuccessful.
Also, it’s possible that you might be able to exclude certain adoption benefits that are provided by your employer from your taxable income. This is more complicated though and, either way, if you’re going through the process you almost certainly want to talk with an accountant about it.