The current tax code offers a sizable tax credit to those who adopt a child. Costs for adopting a child can be immense and this welcomed tax credit aims to assist those looking into adopting a child (or children) by helping reimburse part of these high costs. Last year, the Adoption Tax Credit has been adjusted, so it is more favorable for those wanting to adopt. Not surprisingly, there are some rules that apply to the qualification of this credit.
The Credit is Refundable
For the previous year, the Adoption Tax Credit is a refundable credit, which means that you get a refund check for the credit amount, even if you do not owe any taxes to Uncle Sam.
Income Limits and Figures
The amount of credit that you can claim has been increased; the limit currently, is $ 13,360 per child. The amount of tax credit that you can claim will vary, dependent on the costs sustained toward the adoption. In special cases, namely for special needs children, parents can claim the maximum amount, regardless of having incurred costs equal to the credit amount.
The maximum amount of credit is available for taxpayers who had an Adjusted Gross Income (AGI) of below or up to $185,210 for the 2011 tax year. Those who earned above this set limit are allowed claim, but it will have to be a lower amount in credit. Yet, taxpayers who earned an AGI of $225,210 or more are not eligible at all.
Eligibility of Adopted Child
The Adoption Tax Credit is available for children who are adopted before they turn 18. The credit is also available for adopting those who are disabled (either mentally or physically) and cannot properly look after themselves without assistance.
Filing to Make Claim
The Adoption Tax Credit can be claimed only by filing on paper; this credit cannot be claimed electronically or digitally. Free File can still be used to file your returns, but you will still need to print out the return and then, send the hard copy to the IRS offices. You will need to attach the Qualifying Adoption Expenses (Form 8839) that will indicate the expenses claimed that will qualify you for this credit. You will also need to attach documentation that outlines these expenses. These documents may include:
- The final adoption decree
- A state declaration that proves that the adopted child is in need
- Various adoption-related court documents
- Receipts for the adoption expenses
- Placement agreement from a qualifying adoption agency
A taxpayer is allowed to claim all expenses that are deemed realistic and required to assist in the adoption. Some of these expenses are:
- Adoption fees
- Attorney fees
- Travel and/or moving expenses
- Court expenditures