Adoption Tax Credit Made Permanent as of January 2013

Information supplied by Donald C, Cofsky, Esquire

On January 1, 2013, Congress passed the American Taxpayer Relief Act of 2012 (H.R. 8), and it was signed into law by President Obama on January 2, 2013.

The Adoption Tax Credit was one of the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) that has now been made PERMANENT. This is a welcome turn of events, since many felt that the best outcome would only be a temporary extension of the credit.

All of the ground rules for the Adoption Tax Credit remained the same as they were for the tax year 2012, except that the amount of the maximum credit increased slightly, as did the amounts of the lower and upper limits of income eligibility. All three of these numbers are adjusted each year in accordance with the cost of living. The IRS typically announces the adjusted numbers before the end of the prior year. The IRS has announced that the maximum credit for 2014 will be $13,190 (up from the 2013 number of $12,970) and that the full credit will be available to taxpayers with a modified adjusted gross income (MAGI) of $197,889 or less, after which it will begin to phase out, and will not be available once the MAGI reaches $237,880. All of the other provisions remain intact, including (a) the ability to carry the credit forward for up to five years in order to take full advantage of the credit; (b) the ability to claim the maximum amount of the credit (without the need to show actual expenses) for the adoption of a special needs child; and (c) the ability to claim the credit in the case of a failed adoption.

The Adoption Tax Credit, although now permanent, is not a “refundable credit.” It was refundable during 2010 and 2011 through a provision of the health care legislation, but since this provision was not in the 2001 EGTRRA legislation, it is not a part of the current law. Nevertheless, any unused portion of the tax credit can be carried over as a credit against taxes for up to five years so that it may be used in its entirety.

Adoption Attorneys in New Jersey

Contact our office online or call us at (856) 429-5005 in Haddonfield, NJ, at (856) 429-5005 in Woodbury, NJ, or in Philadelphia, PA, at (856) 429-5005. We provide a free initial consultation in personal injury and workers’ compensation matters.

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Donald Cofsky’s practice involving Family Formation includes adoption and assisted reproduction law. He has represented over 1500 families in private, agency, international, and domestic adoptions. He has served as a lecturer at numerous adoption seminars and has worked with the NJ Supreme Court Rules Committee on revisions to the court rules on adoptions. He is the Immediate Past President of the American Academy of Adoption Attorneys, and a Fellow of the American Academy of Assisted Reproduction Technology Attorneys. Mr. Cofsky is certified by the Supreme Court of NJ as a Civil Trial Attorney, and has received “A” and “V” ratings by Martindale-Hubbell, its highest for both ability and ethics. In 2005 he was named as an “Angel in Adoption” by the Congressional Coalition on Adoption in Washington, DC.