The state of Alabama has both an adoption expense adjustment and an adoption credit available to residents of the state.
Since 1991 the state of Alabama has allowed the adoption expenses incurred by resident taxpayers to be taken as adjustments to income for state income purposes. However, adoption agency fees are not considered deductible for the purpose of income adjusting.
Are the expenses limited?
What type of expenses qualify as an adjustment to income?
Reasonable medical and legal expenses paid or incurred in connection with the adoption of a minor may be claimed as an adjustment to income on the Alabama return.
Medical expenses include:
- Medical and hospital expenses of the child and the child's biological mother (which were incurred for the child's birth).
- Medical expenses incurred following the birth (for the child).
- Adoption agency fees are NOT deductible
Where do I claim the expenses to adjust my income?
- State Section
- Adjustments to Income
- Qualified Adoption Expenses Paid or Incurred
The state of Alabama allows for an adoption credit for private intrastate adoptions or the adoption of a qualified foster child.
How much is the credit?
The adoption credit is a refundable credit worth $1,000 on the Alabama return.
What are the qualifications?
- To qualify for an adoption credit using a private agency, the birth mother, the baby and the adoptive parent(s) must reside in Alabama.
- To qualify for an adoption of a foster child, the child must be in the permanent legal custody of the state (Alabama Department of Human Resources).
Where do I claim the adoption credit on my return?
- State Section
- Adoption Tax Credit
- Add the adopted child's information
Can I claim both the adoption expense adjustment and the credit?
Yes, you can claim both the adoption credit and the adjustments to income if you qualify.