Refundable Adoption Tax Credit ( RAC)

Purpose

  • Nonrecurring adoption expenses are reasonable and necessary adoption fees, court costs, attorney fees, and other expenses which are directly related to the legal adoption of a child, and which are not incurred in violation of federal, state, or local law. No credit shall be allowable for the portion of the nonrecurring adoption expenses paid from any funds received under any federal, state, or local program.

Beginning on January 1, 2024

  • Provides a credit to assist in the nonrecurring adoption expenses for residents of Missouri who proceed in good faith with the adoption of a child regardless of whether the child is a resident of the state.

Eligible Applicants

  • For tax year 2024, any person residing in this state or any business entity providing funds to an employee to enable that employee to proceed in good faith with the adoption of a child is eligible to receive a Refundable Adoption Tax Credit (RAC) up to $10,318 for nonrecurring adoption expenses. The credit is limited to the amount of nonrecurring adoption expenses or the tax year 2024 limitation of $10,318, whichever is less. Only one credit shall be available for each child who is adopted.

Beginning on January 1, 2024

  • Any person residing in this state who proceeds in good faith with the adoption of a child, regardless of whether such child is a special needs child, shall be eligible to receive a tax credit of up to $10,318 subject to change in future years based on the Consumer Price Index for nonrecurring adoption expenses for each child.
  • Any business entity providing funds to an employee to enable that employee to proceed in good faith with the adoption of a child, regardless of whether such child is a special needs child, shall be eligible to receive a tax credit of up to $10,318 subject to change in future years based on the Consumer Price Index for nonrecurring adoption expenses for each child.

Beginning on January 1,2025

  • Any person residing in this state who proceeds in good faith with the adoption of a child, regardless of whether such child is a special needs child, shall be eligible to receive a tax credit of up to $10,616 subject to change in future years based on the Consumer Price Index for nonrecurring adoption expenses for each child.

Any business entity providing funds to an employee to enable that employee to proceed in good faith with the adoption of a child, regardless of whether such child is a special needs child, shall be eligible to receive a tax credit of up to $10,616 subject to change in future years based on the Consumer Price Index for nonrecurring adoption expenses for each child.

Eligible Activities

Beginning January 1, 2024

  • The tax credit shall be allowed regardless of whether the child adopted is a resident or ward of a resident of this state at the time the adoption is initiated.
  • The child must be a special needs child who is a resident or ward of a resident of this state at the time the adoption is initiated as determined by the Department of Social Services, Children's Division, a child-placing agency licensed by the state, or by a court of competent jurisdiction.

How the Program Works

  • To claim the Refundable Adoption Tax Credit, the parent, or their employer if the employer is claiming the full credit, must complete  Form MO-RAC
  • The claimant must attach a copy of the completed Form MO-RAC along with the tax return.
  • Up to 50 percent of any tax credit earned for a resident adoption may be claimed upon placement of the child and the remaining 50 percent claimed after the adoption is final.

Eligible Use of Tax Credit

During the year of the adoption the credit will be reduced by the state's cost of providing care, treatment, maintenance, and services when the child is placed, with no intent to return to the adoptive home, in foster care or residential treatment licensed or operated by the Department of Social Services, Children's Division, the Division of Youth Services, or the Department of Mental Health, or when a juvenile court temporarily or finally relieves the adoptive parents of custody of the child.

Carry Forward Provisions

This credit is not eligible for carry forward due to it being refundable.

Authorization

  • This tax credit may be applied to adopting parents' or the qualifying business' state income tax, corporation income tax, fiduciary tax, or any other tax incurred under the provisions of Chapter 143, RSMo excluding state withholding tax.
  • This credit may be assigned, sold, or transferred. When first claiming the credit as the result of a sale or assignment, attach a statement signed by the seller including the names, addresses, phone numbers, and social security numbers of the buyer and seller, the date the credit was sold, and a copy of the original Form MO-ATC completed by the adoptive parents. Any sale of the adoption tax credit shall be at a discount rate of seventy-five percent or greater of the amount sold.

Forms

Contact Missouri Department of Revenue, Taxation Division: