Adopting a child is a life changing experience for both the adopter and the adoptee. Nothing compares to the feeling of bringing a new life into your family and providing them with a safe, loving home. There is one aspect of adoption that many people are unaware of: it includes a tax credit benefit.
How does it Work
As explained in defined in section 23(d)(1) of the Code, the Tax benefits associated with adoption include a tax credit for qualified costs and expenses paid by the adopter to adopt an eligible child. The credit can also be used for the adoption of special needs child, regardless of qualified or nonqualified expenses. While the credit is nonrefunable and limited to your tax liability for that year, any extra credit can be used for a maximum of five years. As of 2016, the maximum monetary tax credit amount is $13,460 per adoptee.
Tax Credit Qualifications
According to the IRS, qualified adoption expenses include adoption fees, court costs, attorney fees, lodging and meal expenses during travel associated with adoption process, as well as any expense related to the purpose or process of adoption.
However, adopters should be aware that if their modified adjusted gross income is between $201,920 and $241,920 – the tax credit is adjusted. If the modified adjusted gross income is in excess of $241,920 – the tax credit is no longer available to the adopting party. Also included are expenses paid by a registered partner and parent within states that allow that allow same-sex partners to adopt their partner’s child. An exclusion of the benefit is also barred from the adopters income for adoption assistance provided by the adopter’s employer.
To apply the tax credit, the adopting party must complete Form 8839 and attach the form to their Income Tax Return.
Taxes and paperwork can be overwhelming. AdoptiveFamilies.com is offering a webinar with a thorough explanation of the adoption tax credit on Tuesday, March 7th. Join us and learn more about the adoption process. For more information visit our site http://www.abcforadoption.com/.