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The tax law that was passed on June 27, 2001 made the adoption tax credit permanent.
The revised credit, effective for adoptions finalized starting in tax year 2002, includes a higher credit amount, and will be available to a greater number of adoptive families.
The revised credit includes:
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an income eligibility cutoff of $190,000
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an increased credit limit of $10,000 for all adoptions
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annual cost of living adjustments, starting in 2003, for both the credit and income limit
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in 2003, those who finalize a special needs adoption and who earn less than $150,000 can claim the full credit without expense documentation
| Existing Tax Credit | Revised Tax Credit | |
| Maximum Credit Amount | $5,000 ($6,000 for special needs) | $10,000 for all adoptions |
| Income Limit | $75,000 for full credit (phased out at $115,000) | $150,000 for full credit (phased out at $190,000) |
| Credit Expiration | Dec. 31, 2000 for non-special needs adoptions | None; credit is permanent for all adoptions |
| Cost-of-living adjustment | No | Yes, for credit and income limits starting in 2003 |