For tax years 1997 through 2001,
employees can exclude up to $5,000 ($6,000 for a special needs child) of
qualified adoption expenses under an employer’s adoption assistance
program.
General Requirements:
• Adoption assistance program must be in writing and be for
exclusive benefit of employees,
• Adoption assistance program must not discriminate in favor of highly compensated
employees,
• Adoption assistance program must not pay more than 5% of its benefits during the year to
shareholders or owners, and
• Adoption assistance program must provide reasonable notification of availability of the
program to eligible employees.
Qualifying Expenses Include:
• Adoption fees.
• Court costs.
• Attorney fees.
Phase out of Benefits: The amount of
adoption assistance allowed to be excluded from wages is ratably reduced if the
employee’s modified adjusted gross income is more than $75,000 and is
eliminated if the employee’s modified adjusted gross income is $115,000
or more.
