The IRS has announced some changes affecting employers that offer adoption assistance benefits.
Starting in 2012, the maximum amount that’s excludible from a worker’s income for adoption-related expenses is $12,650 per eligible child. That’s a decrease from 2011’s limit of $13,360.
The salary range in which the adoption assistance credit starts to phase out has also changed. The amount that can be excluded from taxes starts to phase out for employees with an annual income of $189,710 and phases out completely for those making $229,710 or more.
That salary range has been increased from last year: $185,210 to $225,210.
Employees can qualify for the adoption tax credit if they’ve adopted a child and paid out-of-pocket expenses relating to the adoption.
The amount an employee can qualify for is directly related to how much the person spent on adoption expenses.
If an employee has adopted a special needs child, he/she is entitled to claim the maximum-allowable adoption credit, even if the out-of-pocket adoption expenses are less than that amount.
The adoption credit for non-special needs children is scheduled to end Dec. 31, 2012.
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