What is the Tax Credit for Adoption in Georgia?

The question often arises, “What is the tax credit for adoption in Georgia?”

As per the recently signed bill by the Georgia governor, adoptive parents of a qualified foster child are eligible to receive a tax credit of $6,000.00 per child per taxable year, beginning with the year in which the adoption becomes final.

The parents receive this credit for five taxable years, and then the credit drops to $2,000 per taxable year until the year the child turns 18.

Let’s look at some related tax and adoption information (remember: this is current as of the date of this post. Always check to make sure you have the most up-to-date information.)

What is the Federal Adoption Tax Credit for 2023?

In addition to the state-specific tax incentives, there are also federal tax credits available for adoptive parents.

For the year 2023, the federal adoption tax credit is subject to phase-out based on Modified Adjusted Gross Income (MAGI).

The phase-out begins for those with MAGIs of $239,230 and ends at $279,230.

If you have gross income below this range, you can claim the full credit ($15,950).

For those with gross income within the range, you can claim a partial credit of that amount.

And, if you are over this range, you cannot claim the credit at all.

It’s important to note that this federal adoption tax credit is not refundable, meaning it only benefits those who owe taxes and reduces the amount of tax owed.

Changes in the Georgia Adoption Tax Credit

The Georgia adoption tax credit has seen significant changes over time.

Previously, the tax credit for adopting a foster child in Georgia was $2,000.

However, House Bill 114 has increased this annual tax incentive to $6,000 (starting 2021), providing a considerable boost to encourage more families to consider adoption.

It’s important to note that the $6,000 credit is only for qualified foster children adopted, and is available for five years, after which the credit drops down to $2,000, and ends the year the child turns 18.

Understanding the Adoption Tax Credit

The adoption tax credit is designed to offset the costs associated with the adoption process.

For Georgia residents, the credit is specifically designed for those adopting a qualified foster child.

The credit begins in the year the adoption is finalized and continues for five years, after which it drops from $6,000 to $2,000, and ends once the child turns 18.

Federal vs. State Adoption Tax Credits

While both federal and state adoption tax credits aim to ease the financial burden of adoption, they function differently.

The federal adoption tax credit for 2023 is non-refundable and subject to income limits, while the Georgia state adoption tax credit is an annual benefit specific to adoptions of qualified foster children.

Also, the federal credit is for all adoptions, whether they are foster care or not; while the state credit is only for qualified foster care adoptions.

Final Thoughts

The adoption tax credit in Georgia and the federal adoption tax credit for 2023 are significant financial aids for families planning to adopt.

As with any tax-related matter, it’s recommended to consult with a tax professional to understand how these credits apply to individual situations.