One of the amazing things about the federal adoption tax credit is that eligibility does not depend on whether an adoption attempt was successful. In an international adoption, the adoption tax credit can be claimed only after the adoption is finalized. Also, if you incur expenses in the year after the adoption is finalized, you may take the tax credit in the year you incurred the expenses. However, if you completed the adoption process in the same year you incurred the expenses, you may claim the adoption tax credit in that year. If the child is born in the United States or is a resident alien, you may claim the adoption tax credit in the year after you incurred the expenses. When Can I Claim The Adoption Tax Credit? Expenses your employer reimburses you through an employee benefit plan.The adoption of a child with special needs may entitle you to claim the full amount of the adoption tax credit even if you have not incurred the full amount of expenses.Įxpenses that do not qualify for the adoption tax credit include: The expenses can be incurred in both a domestic and international adoption. Other expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child (defined as a child under 18 years of age).Īlso, adoption expenses that are required by the state as a condition of your adoption, such as installing a fence around a pool, may qualify.Traveling expenses (which include meals and lodging while away from home).Fortunately, most adoption expenses qualify. The adoption tax credit may only be used to reimburse an adoptive parent for “qualified adoption expenses.” These expenses must be reasonable and necessary adoption fees. If your modified adjusted gross income is $279,230 or more for the year, you are not eligible for the tax credit. If your modified adjusted gross income is more than $239,230 but less than $279,230, you will receive a reduced tax credit. What Are The Income Restrictions Associated With The Credit?įor 2023, the adoption tax credit is fully available in the amount of $15,950 if your modified adjusted gross income is equal to or less than $239,230. Nonetheless, here are our answers to the most common questions about the adoption tax credit and how it works: To take the full benefit of the adoption tax credit, we recommend that you consult with a tax professional who will help you determine the extent of the tax credit available to you. The numbers that define the lower and upper limits of income eligibility also will fluctuate since they are based upon current cost of living. Going forward, the amount of the credit will slightly increase each year because it is based upon a “cost of living” calculation. Simply put, the adoption tax credit is $15,950 in your pocket to offset your adoption costs. Rather, it is a tax refund that is based on a dollar for dollar reduction of your total tax liability. The amazing thing about this tax credit is that it is not a deduction that reduces your income for purposes of determining your tax liability. There is great news for prospective adoptive parents! For 2023, the federal adoption tax credit is $15,950.
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