Trying to adopt a child can be a gut-wrenching experience. But all the hassle and expense is worthwhile when you finally bring home your little bundle of joy.
Strategy: Recoup part of the cost through tax breaks. You can claim a significant tax credit—a dollar-for-dollar reduction of your tax bill—for qualified adoption expenses.
The adoption credit phases out for certain upper-income taxpayers, but most young parents can claim at least a partial tax credit. Figure in the tax “bennies” if you or another family member— perhaps an adult child—is considering this option.
Here’s the whole story: For 2007, the maximum adoption credit is equal to $11,390 of the qualified expenses paid to adopt an eligible child (up from $10,960 for 2006). An “eligible child” is a child either under age 18 or physically or mentally incapable of caring for itself.
What expenses qualify? All reasonable and legal costs directly related to...(register to read more)