Adoption Expenses - Dependency Exemption

Adoptive parents may take the same dependency exemption on their income taxes for their adopted children, and children placed with them for adoption but not yet finalized, as they would for their biological children. The exemption reduces their taxable income. The amount of the dependent exemption is adjusted annually to reflect the cost of living. The main point to remember is that families must provide more than half of their children's support to list them as exemptions. Some adopted children come with subsidies, which may provide more than half of their support. For example, if a child receives $5,000 a year in subsidies, the adoptive family must provide $5,001 or more a year to claim the child as an exemption.