Hertsel Shadian, Attorney at Law, LLC

Information About the Expanded Adoption Tax Credit

21 October 2011

If you are a taxpayer that is adopting or did adopt a child in 2011, you should familiarize yourself with the Federal adoption tax credit. The Affordable Care Act increased the amount of the credit and made it refundable, which means it can increase the amount of your refund. Following are six things to know about this valuable tax credit:

  1. The adoption tax credit—which can be as much as $13,170—offsets qualified adoption expenses, making adoption possible for some families who could not otherwise afford it. Taxpayers who adopted a child in 2010 or 2011 may qualify if they adopted or attempted to adopt a child and paid qualified expenses relating to the adoption.
  2. Taxpayers with modified adjusted gross income of more than $182,520 in 2010 may not qualify for the full amount; the credit phases out completely for modified adjusted gross income at $222,520. However, the IRS might make inflation adjustments for 2011 to this phase-out amount as well as to the maximum credit amount.
  3. You might be able to claim the credit even if the adoption does not become final. If you adopt a special needs child, you might qualify for the full amount of the adoption credit even if you paid few or no adoption-related expenses.
  4. Qualified adoption expenses are those reasonable and necessary expenses directly related to the legal adoption of a child who is under 18 years old, or physically or mentally incapable of caring for himself or herself. These expenses may include adoption fees, court costs, attorney fees and travel expenses.
  5. To claim the credit, a taxpayer must file a paper tax return and Form 8839, Qualified Adoption Expenses (see link below for form and instructions), and must attach documents supporting the adoption. Documents might include a final adoption decree, placement agreement from an authorized agency, court documents, and the state’s determination for special needs children. Taxpayers still can use IRS Free File to prepare their returns, but such returns must be printed and mailed to the IRS, along with all required documentation. Failure to include required documents will delay a taxpayer’s refund.
  6. The IRS states that it is “committed to processing adoption credit claims quickly, but it also must safeguard against improper claims by ensuring the standards for this important credit are met.” Accordingly, if a taxpayer’s return is selected for review, please keep in mind that the IRS will want to ensure the legal criteria are met before the credit is paid. If you are owed a refund beyond the adoption credit, the IRS states that you still will receive that part of your refund while the review is being conducted.

For more information about this valuable tax credit, contact your professional tax advisor or tax preparer, or call Hertsel Shadian, Attorney at Law, LLC at (503) 352-6985. Further information also is available on the IRS’s Adoption Benefits FAQ page (see link below), which can be accessed on the official IRS website at www.IRS.gov, or in the instructions to IRS Form 8839, Qualified Adoption Expenses (link below), which also can be downloaded from the IRS website or ordered by calling 800-TAX-FORM (800-829-3676). Please also feel free to share this article or the link to this article with others that might benefit from this information.


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