Adoption Tax Credit
The 2009 Federal Adoption Tax Credit cap is $12,150. The tax credit cap for 2010 is $12,170 and for 2011, it is $13,170. This is a credit and not a simple deduction. It includes all qualified adoption expenses in the year the family finalizes their adoption. The tax credit is now refundable. This means that even families that owe zero taxes can receive the full tax credit in the form of a tax refund to help with their adoption-related expenses.
What are qualified adoption expenses?
Reasonable and necessary adoption fees, travel (including lodging and meals), attorney fees, court costs and other expenses related to, and whose principal purpose is for, the legal adoption of an eligible child.
Who qualifies for the tax credit?
For 2009, persons with modified adjusted gross incomes of $182,180 or less, phasing out for modified adjusted gross incomes of $222,180. For 2010, the figures are $182,520 - $222,520.
How does the credit work?
International adoptions must be finalized. Some adoptions are considered final in the child’s country of birth and others must be finalized or re-finalized in the U.S. in order to qualify for the credit.
When can the tax credit be claimed?
The credit can be applied against tax liability over six years or whenever expenses reach the $12,150 cap for 2009 ($12,170 in 2010 and $13,170 in 2011), whichever comes first. The tax credit is due to expire on 12/31/11. Write your congress person to express your support for continuation of the credit after 2011!
“The above information is intended as a summary and is not a substitute for professional tax or legal advice. Please consult a tax professional about your specific situation.”
Link to IRS topic 607 on the Adoption Tax Credit
http://www.irs.gov/taxtopics/tc607.html
Link to IRS form 8839 pdf to claim the credit
http://www.irs.gov/pub/irs-pdf/f8839.pdf
Link to IRS from 8839 instructions
http://www.irs.gov/pub/irs-pdf/i8839.pdf
Adoptive Families Magazine Articles on Tax Credit
http://www.adoptivefamilies.com/articles.php?aid=377
Additional information about the adoption tax credit can be found here:
http://taxes.about.com/od/deductionscredits/qt/adoptioncredit.htm
