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Can I deduct an Adoption Credit on my tax return?
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| An adoption credit of up to
$12,150 is allowed
on your tax return for the qualifying costs of adopting a child
under the age of 18, or a person who is physically or mentally incapable of self care. There is a
$12,150
adoption credit limit on your tax return in
the case of foreign adoptions in all cases and the adoption credit is allowed
on your tax return only if the adoption
is finalized.
Your Adoption Credit for a
tax year cannot be more than your tax liability on your tax return for that
tax year
less:
 | any tax credit on
your tax return for child and dependent care expenses; |
| any tax credit on
your tax return for the elderly and disabled; and |
| your tentative alternative minimum
tax on your tax return. |
Any unused adoption credit may be carried forward
to future tax returns for up to five years.
A special needs adoption for
adoption credit purposes is defined as the adoption of a child who:
| according to the state could not or should not be returned to the home of the birth
parents; |
| due to a specific factor or condition (such as ethnic background, age, membership in a
minority group, or sibling group, medical condition, or physical, mental or emotional
handicap) could not be expected to be adopted unless an adoption credit is provided; and |
| is a resident or citizen of the United States. |
Expenses that qualify for the
adoption credit are:
| reasonable and necessary adoption fees; |
| court costs; |
| attorney's fees; and |
| other expenses directly related to, and whose principal purpose is for, the legal
adoption of an eligible child. |
If you paid qualifying expenses in
2009 but the adoption was not final at the end of
the tax year you may not claim the adoption credit on your 2009
tax return. Qualified
expenses paid in one tax year are not taken into account for purposes of the
adoption credit until
the next tax year, unless the expenses qualifying for the adoption credit are incurred in the
tax year the adoption becomes
final.
The adoption credit is not allowed for expenses:
| incurred in violation of state or federal law; |
| incurred in carrying out any surrogate parenting arrangement; |
| incurred in connection with the adoption of a child of the taxpayer's spouse; |
| that are paid or reimbursed by a federal, state, or local grant; or |
| that are paid or reimbursed under an employer's adoption assistance program. |
In addition to an adoption credit, the
tax law provides an adoption assistance exclusion from an employee's taxable
income
for up to $12,150 of employer provided
adoption reimbursement for specified adoption expenses incurred and paid pursuant to a
written adoption assistance plan. The $12,150 limit is applied against each child adopted, rather
than on an annual basis.
Taxpayers adopting children are eligible for both the adoption credit and the
adoption assistance exclusion of adoption expenses paid for through an employer's
adoption assistance plan. However,
the same adoption expense cannot qualify for both the adoption credit and the
adoption assistance exclusion.
To qualify for either the
adoption credit or adoption assistance exclusion, the taxpayer must provide the IRS
with the name, age and TIN of each adopted child. |
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Related tax
information about the Adoption Credit |
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| Tax Credits |
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IRS publications about
the Adoption Credit:
For further information about the Adoption Credit see IRS Publication 968,
Tax Benefits for Adoption.
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Ask Julian Block your IRS and tax questions! |
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If you can't find the answer to your IRS or tax question in our
web you can call former IRS Special Agent and one of the country's foremost tax attorneys, nationally syndicated columnist ("The Tax
Adviser") Julian Block. Julian is also the tax Editor of Mutual Funds Magazine, America's premier investment magazine. To
call Julian for a tax consultation click
here. |
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