ADOPTION TAX BENEFITS: EMPHASIZING THE EXCLUSION BEFORE THE CREDIT

Abstract

This paper reviews the qualifications and limitations on the adoption tax credit and exclusion. It also details the complications in coordinating the exclusion and the credit. The paper discusses reasons why tax policy should encourage greater business participation through employer adoption assistance programs. It then proposes tax policy which would make employer reimbursement (with the exclusion), rather than the adoption tax credit, the primary tax benefit for many adoptions, at least for adoptive parents whose employers offer adoption assistance programs. The results could include (1) greatly reduced complication in coordinating the available tax benefits, (2) lower governmental costs for adoption tax benefits, (3) more participation by businesses in offering employee adoption assistance programs, (4) less complication in tax return preparation for adoptive parents, and (5) an earlier availability of the adoption benefits in many cases.