Qualified Adoption Expenses (QAE)
What it is:
Qualified adoption expenses (QAEs) are costs associated with adopting a child. They are generally tax-deductible and may even qualify for a tax credit.
How it works (Example):
Why it Matters:
Adoption is expensive, and in order to facilitate more of them, the IRS allows parents to recoup some of the costs. However, the costs of adoption vary considerably: parents who adopt special-needs children, for example, receive a full adoption tax credit even if the adoption costs are less than the amount of the tax credit. Additionally, the credit phases out for parents with high incomes.