Pennsylvania’s 116th legislative district Representative Toohil (R-Luzerne County) has stated she is considering proposing Pennsylvania state tax credits of $500 and $1000 for Pennsylvania families who foster or adopt a child.
According to this article, the last time the adoption tax credit was refundable was in 2010-11. While the American Tax Pay Relief Act in January 2013 made the adoption tax credit permanent, it did not include the ability to make it refundable. This harmed low-income families unable to fully take advantage of the credit. Legislation has just been introduced to make the adoption tax credit refundable thereby helping low-income families take full advantage of the adoption tax credit which will hopefully support and encourage more adoptions.
According to this report, Kentucky State House Democrat Caucus Leader Rocky Adkins filed a house bill seeking to help Kentucky families with adoption costs by providing Kentucky residents with a proposed state adoption tax credit.
The IRS just released the 2017 Cost-of-Living Adjustments (COLAs) which include changes to the Adoption Tax Credit for special needs children and some qualified adoption expenses for children that are not special needs.
For employer-provided adoption assistance, the maximum that can be excluded from employee income under an employer-provided adoption assistance program increased by $110 from the 2016 amount to $13,570.
For individuals, the maximum adoption credit allowed for a child also increased by $110 from 2016 to $13,570.
The 2017 COLAs also allowed for $1,620 in additional modified AGI before 2017 phaseouts begin. Employer exclusions and individual credits begin phaseouts for modified adjusted gross incomes greater than $203,540 and entirely phase out for individuals with modified adjusted gross incomes of $243,540 or more.
Note: Even with an understanding of phase outs, you must consult with a qualified tax professional as there are differences in the amounts of exclusions/credits you may be able to receive dependent upon whether the adopted child is considered by the IRS as a child with special needs or a child without special needs (only qualified adoption expenses).
According to this article, the maximum adoption tax credit for 2016 is $13,460. Please discuss with your accountant to find out if you are eligible and if there are phaseouts.
