In the summer of 2001, the Federal Adoption Tax Credit was updated. The most important update was to expand benefits to children with special needs adopted from the U.S. foster care system. Originally families adopting from the foster care system could claim the adoption tax credit, provided they had qualifying expenses. Unfortunately, the IRS list of qualifying expenses was limited to the cost of the adoption process, but not the day-to-day costs of raising a child with special needs. However, beginning in tax year 2003, families adopting a child with special needs from foster care, had access to this same tax credit without needing to document expenses. For tax year 2005, the tax credit is $10,630 and you have this year and up to the next five years in which to use it. For families that adopted in 2002 or earlier, you can only claim the credit against expenses you paid related to the adoption process.

http://www.nacac.org/pub_taxcredit.html