Expanded Qualified Adoption Tax Credit Rules
Adopting a child is one of the most magnanimous things you can do and the tax code has expanded to take already generous tax breaks and made them even better. If you ultimately choose to adopt, you might be eligible to take a tax credit for the expenses incurred and starting in tax year 2010, the tax credit was expanded in several ways to help alleviate some of the financial burden of adoption.
Expanded Adoption Credit
Adoption can be a great way to bring a child into your home, as well as help that child find a loving home and good opportunities. As anyone who has ever adopted a child can tell you, it is extremely expensive. As a result, the government is willing to help offset some of the costs by offering the adoption tax credit. Here are some things to keep in mind about the expanded adoption tax credit:
- The new, higher amount, thanks to the Affordable Care Act, is $13,360. However, the credit phases out as your adjusted gross income increases. The credit is reduced when you have an AGI of $185,211 to $225,209, and if your AGI is more than $225,210, you are not eligible for the credit.
- You can claim the credit for qualified costs associated with a legal adoption. These costs might include fees charged by the adoption agency, court costs, travel expenses, and attorney costs. All claimed costs should be directly related to the adoption of the child.
- Eligible children must be under the age of 18. Children over the age of 18 are eligible if they are physically unable to provide their own care, for physical or mental reasons.
- You will need to provide documentation of the adoption with your tax return. Make sure you keep your own copies, of course, and send a copy of the documents that support your case. These might include the final decree, or the placement agreement from an authorized adoption agency. For special needs adoptees, you will need a copy of the paperwork from the state, indicating the special needs status.
- Realize that if you have a tax return that includes an adoption credit, you will need to send in a hard copy of your tax return along with documentation related to qualified adoption expenses.
Also, since you will have to send in documentation via mail, you might have to wait a little bit longer to receive a tax refund. You can speed matters up a bit by requesting direct deposit though.
If you are interested in adopting, the government has made it a little more attractive. You can offset some of your costs with a tax credit, which lowers what you owe in taxes dollar for dollar. The fact that the tax credit is now refundable for 2011, allowing you to receive money back even if you don’t owe anything, is especially helpful. Just make sure that you have proper documentation, and that you mail in your tax return so that you receive proper credit.
TurboTax will guide you through the Qualified Adoption Credit and put the proper information on your tax return.