Adoption Credit Amount for Tax Year 2008

The maximum credit allowed for qualifying adoption expenses has been increased to $11,650 due to an inflation adjustment.

The adoption credit begins to phase-out when modified adjusted gross income (MAGI) exceeds $174,730. The adoption credit is completely phased out when MAGI reaches $214,730.

Special Rule for Adopting a Child With Special Needs

You can claim up to the maximum credit amount of $11,650 (subject to income and tax liability limits) for a child with special needs even if your qualifying expenses are less than $11,650.

Definition of Child with Special Needs - An child is eligible if he or she is a citizen or resident of the United States (including U.S. possessions) and a state determines that the child cannot or should not be returned to his or her parents' home and probably will not be adopted unless adoption assistance is provided to the adoptive parents. Factors used by states to determine if a child has special needs could include:

• The child's ethnic background,

• The child's age,

• Whether the child is a member of a minority or sibling group, or

• Whether the child has a medical condition or physical, mental, or emotional handicap.

If your state has determined that the child you are adopting is a child with special needs, you should keep evidence of that fact for your records.

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