For the 2010 tax year, under 23(b)(1), adoptive families with modified adjusted gross incomes of up to $182,520.00 should be eligible to receive the full $12,170.00 adoption tax credit! The tax credit completely phases out for families with modified adjusted gross incomes of $222,520.00 or more. (23 (b)(2)(A). (See section 3.15 of this revenue procedure for the adjusted items relating to adoption assistance programs.)

Important Note: This tax credit is set to expire December 31st, 2010 unless congress passes a bill to extend it or make it permanent.

Special Rule for adoptive parents under 23(a)(3) adoptive parents of SPECIAL NEEDS CHILDREN (as determined by the state) may qualify for the full $12,170.00 tax credit regardless of whether or not they have incurred any actual expenses. Important Note: This tax credit is set to expire December 31st, 2010 unless congress passes a bill to extend it or make it permanent. For Special needs children only the tax credit may remain but revert back to $5,000. or $6,000.

• For international adoptions the following link provides detail on how the IRS will treat the adoption tax credit for different visa's and different situations. Page 5 and 6 provide the answers. www.irs.gov/irb/2005-26_IRB/ar14.html
• For domestic adoptions, the credit may be taken in the year that follows the year in which the expenses are incurred as well as in the year in which the adoption was finalized.
  *Note: In domestic situations, the credit is available for each effort to adopt an eligible child even if the adoption is not completed.
• IRS Revenue Procedure 2007-66 contains the full list of inflation adjustments for 2008, including the .03 Adoption Credit. www.irs.gov/pub/irs-drop/rp-07-66.pdf

• Costs of adopting a spouse's child
• Expenses taken as a credit or deduction elsewhere on a tax return
• Expenses paid for through an employer program
• Expenses paid for by federal state or local funds

• For the 2010 tax year up to $12,170.00. in adoption assistance provided by an employer may be excluded from an employee's taxable income!

• Find out if you can apply for an Adoption Taxpayer Identification Number (ATIN): The answer may differ depending on whether your adoption was a domestic one or international. See the below link to the IRS Q & A: www.irs.gov/individuals/article/0,,id=96452,00.html

• Try www.nfpaonline.org. This organization has been providing informative yearly guides on the adoption tax credit.

This information is to serve as a guideline only and should not serve as a definitive source or a substitute for professional tax advice.