It’s coming up on tax time again here in the U.S. so it’s time to talk about the Adoption Tax Credit. Here are some frequently asked questions regarding the credit for 2013. As always, please consult your tax adviser. I personally use a CPA to do my taxes because I’ve tried doing them on my own and have messed it up because it can get complicated. Here’s how you can find a good CPA.
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What is the adoption tax credit?
The adoption tax credit offsets qualified adoption expenses, making adoption possible for some families who could not otherwise afford it.
How much is the adoption tax credit for 2013?
The adoption tax credit for tax year 2013 is $12,970 per adopted child.
Is the adoption tax credit refundable or nonrefundable – and what does that mean?
The credit was made a permanent part of the tax law in 2012 as a nonrefundable tax credit. A refundable tax credit is one you get back regardless of what you owe or paid in taxes for the year. Since the adoption tax credit is nonrefundable, you receive only what you have in federal income tax liability. The credit can be “carried over” for up to 5 additional years until you get back the entire credit amount for that adoption.
What are the income limits for the credit?
Families with an income below $194,580 can claim the full credit. Those that make between $194,580 and $234,580 can claim partial credit, and those that make over $234,580 cannot claim the credit.
What are the expenses that can be claimed?
Qualified adoption expenses are “reasonable and necessary adoption fees” which include agency fees, attorney fees, travel expenses, court costs, etc.
When can you claim it?
If you are adopting from the U.S. you can claim the credit the year of finalization or the year after you had adoption expenses.
Here is a table from the IRS.gov website to help explain:
| Adopting a child who is a U.S. citizen or resident. |
| IF you pay qualifying expenses in… | THEN take the credit in… |
| Any year before the year the adoption is final | The year after the year of the payment. |
| The year the adoption is final | The year the adoption is final. |
| Any year after the year the adoption is final | The year of the payment. |
More adoption tax credit information:
www.nacac.org/taxcredit/taxcredit.html
IRS.gov
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