The Federal Tax Credits Blog

Posts Tagged ‘Adoption’

Adopting Step-Child – TaxMama.com

Google Q1 2010 Earnings Call

Question: Adoption tax credit is refundable this year?

Okay…please don’t slam me or tell me I’m stupid.

I guess I’m in disbelief.

But, I have been told for 2010, that the adoption tax credit is now a refundable credit.

What I have been told is that if anyone has the credit and/or still qualifies for a carry-forward, we will get our carry-forward paid to us.

Anyone know if this is truly correct? Everything I’ve been seeing says “yes”…but the cautious side of me wants to make sure that I haven’t mis-read anything, or if there are any stipulations.

Answer: Hi,
This is from the IRS:

Topic 607 – Adoption Credit

In 2010 and 2011, you may be able to take a refundable tax credit for qualifying expenses paid to adopt an eligible child (including a child with special needs). This means that you could qualify for a tax refund even if you did not have federal income tax withheld. For tax years prior to 2010, the adoption credit is not refundable.

Under new Adoption Credit Rules for the 2010 tax year, you must attach one or more adoption-related documents (identified in the form instructions) with the completed Form 8839 (PDF), Qualified Adoption Expenses, and attach the form to your Form 1040 or Form 1040A return, to claim the adoption credit or income exclusion. The required documents are different if the adoption is foreign, or domestic, final or not final and if the adoption is for a special-needs child.

A tax credit, including the adoption credit, reduces your tax liability. For expenses paid prior to the year the adoption becomes final, the credit generally is allowed for the year following the year of payment. For expenses paid in and after the year the adoption becomes final, the credit is allowed in the year of payment. The adoption credit is not available for any reimbursed expense. In addition to the credit, certain amounts paid by your employer for qualifying adoption expenses may be excludable from your gross income.

A taxpayer who paid qualifying expenses in the current year for an adoption which became final in the current year, may be eligible to claim the credit for the expenses on the current year return, in addition to credit for expenses paid in a prior year.

For both the credit or the exclusion, qualifying expenses include reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging while away from home), and other expenses directly related to and for which the principal purpose is the legal adoption of an eligible child. An eligible child must be under 18 years old, or be physically or mentally incapable of caring for himself or herself. The adoption credit or exclusion cannot be taken for a child who is not a United States citizen or resident unless the adoption becomes final. In the case of an adoption of a special-needs child, you may be eligible for a certain amount of credit or exclusion regardless of actual expenses paid or incurred. A child has special-needs if (1) the child otherwise meets the definition of eligible child, (2) the child is a United States citizen or resident, (3) a state determines that the child cannot or should not be returned to his or her parent’s home, and (4) a state determines that the child probably will not be adopted unless assistance is provided. The credit and exclusion for qualifying adoption expenses are each subject to a dollar limit and an income limit.

Please read more:

http://www.irs.gov/taxtopics/tc607.html

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Question: Adoption Credit Form 8839?

I adopted a child as a second parent adoption and it was finalized in December of 2009. I did not report it on my 2009 taxes. I incurred expenses in 2009 and 2010.

I think I need to claim my 2010 expenses on my 2010 return and amend my 2009 return for those expenses.

I am working on my amendment to my 2009 return. I keep getting a 0 on line 18 of the 8839. I did not spend more than the 12150 maximum. Should I get a credit on my 2009 amended return for my expenses or do I have to use the carryforward worksheet?

Thank you.

Answer: yes

IRS Sticks To April 18 Tax-Filing Deadline Even If Government Shuts Down

The Internal Revenue Service will delay processing tax returns filed on paper if many government functions shut down April 8 because of the budget stalemate in Congress, potentially stalling refunds for millions of taxpayers.

Tax Tips 2010 #9 of 20

Question: International Adoption tax question.?

We adopted our daughter from China. We started the process in 2005, our home study Anniversary date was 12/05/2005 Because of the very long match waits we did not travel till Feb of this year, 2008. The adoption as far as China is concerned was finalized in China, Our Daughter became a US citizen when we touched down back in the states. Both my husband and I traveled to China so the adoption would be complete there. Our State, VA requires a 1 year followup for the ‘re-adoption’ to receive a VA Birth Certificate. Our Agency as well requires a 1 year update this will be at the end of Feb. 2009.

Does anyone know about the Federal Government Tax credit for adoption? It is my understanding that it is around $10500 or so. Can we claim this credit this year on our 2008 taxes or will we be forced to wait one more year to claim this on our 2009.

Answer: Hi Lilly,

I think you can claim the tax credit on your 08 filing. You’ll need IRS form 8839. The instructions are on IRS publication #968.

If you google the form and publication, you should find what you’re looking for.

BTW- Congratulations!

Senate Tax-Cut Plan Would Add $857 Billion to Debt Over Decade

Senate leaders released an agreement crafted by the White House and Republicans to sustain Bush-era tax rates through 2012, set the estate tax at the lowest rate in 80 years, extend jobless aid and cut payroll taxes by 2 percentage points.

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