Adoption credit.   Beginning in 2007, the credit allowed for an adoption of a child with special needs is $11,390 and the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $11,390. The credit begins to phase out if you have modified adjusted gross income of $170,820 or more and is completely phased out if you have modified adjusted gross income of $210,820 or more.  The tax credit is permanent and the maximum amount of the credit is adjusted annually for inflation. This means that for qualified families, a part of the cost of an international adoption is reimbursed by the federal government. This is a great opportunity for families and children in need. 

The Adoption Tax Credit is a reduction in your tax liability for the year that your adoption is completed. The reduction is a direct credit to the amount of tax due on your 1040 return. Excess credit can be carried forward for 5 years. Please consult your tax advisor for full details of the adoption tax credit or check the IRS web site for information about the IRS Adoption Taxpayer Identification Number, and for Topic 607 on the Adoption Tax Credit and Tax Exclusion.  The relevant tax form is 8839.