If you paid expenses to adopt an eligible child in 2011, you may be able to claim a federal tax credit of up to $13,360 on your U.S. income tax return. Here are six facts you should know related to claiming the expanded adoption credit for federal income tax purposes:
1. Refundable Credit. The Affordable Care Act increased the amount of the credit and made it refundable, which means you can get the credit as a tax refund even after your tax liability has been reduced to zero.
2. Filing. For tax year 2011, you must file a paper tax return, along with IRS Form 8839, Qualified Adoption Expenses (see links below for form and instructions), and also attach documents supporting the adoption. Taxpayers claiming the credit still will be able to use IRS Free File or other software to prepare their returns, but the returns must be printed and mailed to the IRS, along with all required documentation.
3. Documents. Documents may include a final adoption decree, placement agreement from an authorized agency, court documents and/or the state’s determination for special needs children.
4. Eligible Expenses. Qualified adoption expenses are reasonable and necessary expenses directly related to the legal adoption of the child. These expenses may include adoption fees, court costs, attorney fees and travel expenses.
5. Eligible Child. An eligible child must be under 18 years old, or physically or mentally incapable of caring for himself or herself.
6. Applicable AGI Limits. If your modified adjusted gross income is more than $185,210, your credit is reduced. If your modified AGI is $225,210 or more, you cannot take the credit.
For more information about the federal adoption credit, contact your professional tax advisor or tax preparer, or call Hertsel Shadian, Attorney at Law, LLC at (503) 352-6985. Additional information also can be found on the IRS’s Adoption Credit FAQ page (see link below) at www.IRS.gov, or in the instructions to IRS Form 8839 (link below), which form and instructions also can be downloaded from the IRS website directly or ordered from the IRS by calling 800-TAX-FORM (800-829-3676). Please also feel free to share this article with others that might benefit from this information.
- IRS Form 8839 (2011)
- Instructions for IRS Form 8839
- Adoption Benefits FAQs
- IRS Publication 4903, Affordable Care Act Expands Adoption Tax Credit Flyer