How To Claim The Adoption Credit

The adoption tax credit provides an incentive for individuals or families to adopt a child. You may qualify for the adoption credit if you adopted or attempted to adopt a child in 2014, and paid qualified expenses relating to the adoption. The credit is valued at up to $13,190 for each effort to adopt an eligible child. The effort ends when the child is adopted. For 2014, the adoption credit is a nonrefundable credit

A credit for adoption is available for persons who:

• Adopt a domestic (US) child under the age of 18
• Adopt a domestic special needs child (certified by a state agency)
• Adopt a foreign child whose adoption became final in the current tax year

To claim this credit, you’ll need to file Form 8839 Qualified Adoption Expenses, and make sure you retain copies of your adoption papers.

Who qualifies for the credit?

If you finalized an adoption in 2014, you may qualify for the credit. The credit is a one time amount for each adopted child. If you began an adoption in a prior tax year which is not yet final, and had expenses in that year, you may be able to apply those expenses this year against the credit for that child.

The adoption of a foreign child must be final before you can claim the credit. You can still claim expenses paid in a prior year when the adoption becomes final.

For 2014, this credit begins to phase out when your modified adjusted gross income is over $197,880, and is phased out completely when your modified adjusted gross income exceeds $237,880.

What adoption expenses qualify for the credit?

Expenses which can qualify for the credit include:

• Adoption fees
• Attorney fees
• Home studies by an authorized placement agency
• Court costs
• Travel expenses including meals and lodging while away from home
• Visas and re-adoption expenses for a foreign child

The following are not considered qualified adoption expenses, and cannot be deducted:

• Expenses that violate state or federal law.
• Expenses incurred for carrying out a surrogate parenting arrangement.
• Expenses for the adoption of a spouse’s child.
• Amounts for which you received funds under any federal, state, or local program.
• Amounts, which are allowed as a credit or deduction under any other federal income tax rule.
• Amounts paid or reimbursed by an employer, or other person or organization.
• Any amounts paid before 1997.

Your supporting adoption documents no longer need to be filed with your tax return. Now you can e-file your federal tax return and Form 8839 for the quickest processing. However, you must keep your supporting adoption documents in case the IRS needs to peruse them.

Milton G Boothe is an IRS Enrolled Agent with over twenty years of tax and financial accounting experience, including several years at PricewaterhouseCoopers. He is also a British certified Chartered Accountant. He is currently employed in private tax practices where he helps people resolve their tax problems, minimize their taxes, and routinely represents the interests of taxpayers before the Internal Revenue Service. As an Enrolled Agent (EA) Boothe is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the IRS for audits, collections, and appeals.
Milton G Boothe is also the author of several tax publications, wherein he encourages people to empower themselves by learning to do their own taxes.

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