The Adoption Tax Credit Refundability Act of 2023 may seem like an arcane tax law that’s hard to understand and tough to support. With a new Congress coming in today, all the leftover legislative bills from the previous Congress will be tossed out. Many will be reintroduced so the new Congress can consider them. The Adoption Tax Credit Refundability Act should be one of them. But first, what does this bill do?
What’s refundability?
Adoption expenses can add up. Fortunately, there are tax credits available. You can file for as much as $16,810 spent in 2024, $17,280 for 2025. If you owe income taxes, that credit will reduce the tax you owe. If you owe $20,000 in taxes and take the full credit this year, you will end up owing just $3,190. If you owe $1,200 in taxes, you will owe nothing after the credit.
This is a non-refundable tax credit. If you don’t owe anything in income taxes, which is the case for nearly half of Americans, you don’t benefit from the tax credit at all.
If the credit were refundable, things would be different. If you were eligible for the full $16,810 tax credit an you owed no taxes, you would receive a refund of $16,810.
What does the refundability act do?
This bill is very simple. It moves the adoption expenses tax credit from the “nonrefundable” credits to the “refundable credits.” That’s all.
Who would benefit?
Everyone who adopts a child would benefit, and the children would benefit, too, since adoptive parents would have a little more cash on hand for food, clothing, medical expenses, and all the other costs of bringing up a child.
This law would allow loving families with lower incomes to consider adoption. Currently, adoption is enough of an investment that the cost can be an obstacle for some families.
“The more children that are adopted by loving families, the better off our nation is,” said Senator Bob Casey, one of the congressional representatives who introduced the bill. “The Adoption Tax Credit has been a proven success in increasing families’ ability to offer permanent homes to adoptive children and this bill will allow more families to experience the joy of expanding their family through adoption.”
What happens next?
If the bill is reintroduced in the new Congress, it can once again be considered and it can become law. The list of cosponsors shows the senators who spoke up for this bill already. Is your senator is on the list?