# Adoption Tax Credit Refundability Act of 2021

Right now, when families adopt a child, they can claim a tax credit to help offset the costs of adoption—things like legal fees, court costs, and agency expenses. However, there's a major limitation: this credit only works if you owe enough in taxes to use it. If the credit is larger than the taxes you owe, you lose the extra money. This bill changes that by making the adoption tax credit "refundable," which means if the credit is bigger than what you owe in taxes, the government sends you the difference as a refund, just like it does with other refundable credits such as the Earned Income Tax Credit.

To understand why this matters, imagine a family that spends $15,000 on adoption expenses but only owes $8,000 in federal income taxes. Under current law, they get an $8,000 credit and lose the remaining $7,000. With this bill, they'd get the full $15,000 credit—the $8,000 applied to their taxes, plus a $7,000 refund. This is especially helpful for lower-income families who want to adopt but can't afford the upfront costs because they don't earn enough to fully use the credit.

The bill also requires the IRS to create a standardized form that adoption agencies and lawyers can use to verify that an adoption is legal. This streamlines the process and makes it easier for families to claim the credit without jumping through complicated hoops. The changes would apply to tax years starting after December 31, 2020, and anyone who had leftover adoption credits from previous years would be able to use them as refundable credits going forward.

Adoption Tax Credit Refundability Act of 2021

Davis, Danny K.

Adoption Tax Credit Refundability Act of 2021 This bill makes the tax credit for adoption expenses refundable.