Which statement is true regarding the Adoption Credit?

The Adoption Credit is a nonrefundable tax credit that helps offset the costs associated with adopting a child. The correct statement is that it begins to phase out for taxpayers with modified adjusted gross incomes over a specific threshold. This means that as a taxpayer's income increases beyond that threshold, the amount of the credit they can claim gradually decreases. This phase-out ensures that the credit is targeted to those who may need it the most, as lower and middle-income families often face higher relative costs associated with adoption.

The Adoption Credit is not tied to the number of dependents a taxpayer has; thus, it does not modify based on that factor. It also provides a substantial benefit, but it is not a flat amount for every taxpayer. Instead, it is subject to specific income limitations that affect the total amount that can be claimed. Additionally, the credit is available for both domestic and international adoptions, making it accessible to a broader range of families looking to adopt.