Adoption Tax Credit - John R. Dundon II, Enrolled Agent
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Adoption Tax Credit

28 Oct Adoption Tax Credit

Posted at 00:00h in Adoption, Tax Credit, Tax Deductible Expenses, Tax Guidance & Preparation by
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The Affordable Care Act increased the amount of the Adoption Tax Credit and made it fully refundable, which means it can increase the amount of your refund or decrease the amount of your tax liability in the immediate tax year.Additionally:

  1. The adoption tax credit, which is as much as $13,170, offsets qualified adoption expenses making adoption possible for some families who could not otherwise afford it. Taxpayers who adopt a child in 2010 or 2011 may qualify if you adopted or attempted to adopt a child and paid qualified expenses relating to the adoption.

  2. Taxpayers with modified adjusted gross income of more than $182,520 in 2010 may not qualify for the full amount and it phases out completely at $222,520. The IRS may make inflation adjustments for 2011 to this phase-out amount as well as to the maximum credit amount.

  3. You may be able to claim the credit even if the adoption does not become final. If you adopt a special needs child, you may qualify for the full amount of the adoption credit even if you paid few or no adoption-related expenses.

  4. Qualified adoption expenses are reasonable and necessary expenses directly related to the legal adoption of the child who is under 18 years old, or physically or mentally incapable of caring for himself or herself. These expenses may include adoption fees, court costs, attorney fees and travel expenses.

  5. To claim the credit, you must file a paper tax return and IRS Form 8839, Qualified Adoption Expenses, and you must attach documents supporting the adoption. Documents may include a final adoption decree, placement agreement from an authorized agency, court documents and the state’s determination for special needs children. You can still use IRS Free File to prepare your return, but it must be printed and mailed to the IRS with all required documentation.

    Failure to include required documents will delay processing of your return.

The IRS is committed to processing adoption credit claims efficiently and at the same time safeguard against improper claims. If your return is selected for review, please keep in mind that it is necessary for the IRS to ensure the legal criteria are met before the credit can be paid. If you are owed a refund beyond the adoption credit, you will still receive that part of your refund while the review is being conducted.

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