Alabama provides an Adoption Tax Credit for eligible adoptive parent(s) who reside in Alabama and qualify under Alabama law. Taxpayers claiming the credit must complete Schedule AAC (Alabama Adoption Tax Credit) and attach it to their Alabama income tax return. Schedule AAC is used to calculate the allowable credit and provide information about each qualifying adoptee.
Eligibility and Claiming the Credit
- The Adoption Tax Credit is available only to eligible adoptive parent(s) who are Alabama residents.
- A credit of $2,000 is allowed for each qualifying adoptee reported in Part I of Schedule AAC (generally for children determined by the Alabama Department of Human Resources to have special needs).
- A credit of $1,000 is allowed for each qualifying adoptee reported in Part II of Schedule AAC (for other qualifying adoptions that do not meet the special needs criteria).
- The adoption of the child of either parent does not qualify for the Adoption Tax Credit.
- Taxpayers claiming the credit must complete Schedule AAC and provide all required information relating to the adoption and each qualifying adoptee.
Reporting Requirements
- Complete Schedule AAC and attach it to the applicable Alabama income tax return (Form 40 or Form 40NR).
- Taxpayers eligible to claim the Adoption Tax Credit must report the total credit on Schedule OC as instructed.
- All required identifying information and adoption-related documentation requested on Schedule AAC must be provided to support the credit claim.
Source:
Form 40 Instructions (Alabama Department of Revenue)
Schedule AAC – Alabama Adoption Tax Credit
Disclaimer: Always verify details with the most current Federal or State Department of Revenue Forms and Instructions. Tax laws and forms may change annually. For complex situations, consult a CPA or tax attorney.