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Adoption Credit Questions

What is the adoption credit?

For the years of 2010 and 2011 there is a tax credit that is paid to parents who adopt an eligible child or child with special needs. This tax credit is called the adoption credit. The credit allows for parents to claim the money that they spent on the adoption in the year that they have adopted a child. The child would be eligible if they are under 18 years of age and are incapable of caring for them. The credit cannot be used to claim a child that is not a US citizen until the adoption becomes final. The parents would have to file a married filing jointly tax return to get this credit. Read below where Experts have answered many questions about the adoption credits.

Are parents eligible to take an adoption credit in 2010 if they had no expenses adopting a special needs child and their income including income for working as a contractor in Iraq was 285,000?

When the parents adopt the child then they would be qualified to get the adoption credit if they had expenses that they incurred during the adoption. If they did not have any expenses then they would not be able to get the adoption credit.

If a set of parents wanted to adopt a foreign child, would they get the adoption credit only when the adoption is final or can they regain their money if the adoption never becomes final?

The only way for the parents to be able to claim the adoption credit on a foreign child is when the adoption is final. If the adoption of the foreign child never becomes final, then the parents would not be able to regain any expenses that they spent. If the adoption becomes final, then the parents would be able to get the credit in the year the adoption wad final.

If a couple adopts a child in 2010, but had a failed adoption in 2009, would the couple be able to amend their 2009 tax return to regain some of the costs on the failed adoption?

There may be a chance that the failed adoption costs may be qualified for the adoption credit if a successful adoption were to follow the failed adoption. The only thing that the credit would do is to lump the costs of both adoptions into one sum. The credit would cover the limits per eligible child and be considered as one transaction. Even if the expenses were paid on two separate children and in two separate years, the two adoptions would still be considered the same transaction for the purpose of the adoption credit. The parents would claim two adoptions on their 2010 tax return when they file the return they need to include all the information of the failed adoption as well as the successful adoption.

If a parent adopts a child in the year 2011, but the adoption would not be final until the year 2012, when would the parent file the adoption credit?

The parent’s expenses that they paid in the year before the adoption was filed would generally not be able to be claimed till the year that they paid the money, but if the child is not a US citizen, then the adoption credit would not be able to be claimed until the adoption is final. When the adoption is not final, then the parent can claim the expenses the year after they are paid even if the adoption is not final as long as the child is a US citizen.

When a couple decides to adopt a child, then they have an adoption credit on their taxes that they may be able to use in order to gain some of the money that they spent to adopt the child. When a parent adopts a child and they are filling out their taxes or they are in the process of adopting a child and filling out their taxes they may run into questions regarding the rules and laws about the adoption credit. When these questions arise, then the person would need to seek the answers of the Expert to gain the answers that the need.

Ask a Tax Professional

Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: General
Satisfied Customers: 572
Experience:  10 years experience
16356563
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Tax Professionals are online & ready to help you now

Wallstreet Esq.
Tax Attorney
Satisfied Customers: 570
10 years experience
Wendy Reed
Enrolled Agent
Satisfied Customers: 3052
15+ years tax preparation and tax advice.
Mark D
Enrolled Agent
Satisfied Customers: 985
MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Recent Adoption Credit Questions

  • I have 2 questions about the adoption tax credit. My husband

    I have 2 questions about the adoption tax credit. My husband and I are planning to adopt a child, domestic, infant. We have already spent approx. $17,000 in fees in 2014. We spent $2,000 for the Home Study in April of this year and $15,000 to the Law Center (Adoption Agency) as "advertising and set up fees" no legal fees have been paid as of yet. We have not yet been selected by a birth mother and most likely will not be picked until the spring or summer of 2015. Can we use any of the IRS Adoption Tax Credit towards our 2014 expenses we have already paid?
    Question #2 - I understand the credit can only be applied to our tax liability. Our combined income is approx $160,000. We usually get a tax refund, so as I understand it, unless we have a tax liability we will not be able to take advantage of the adoption credit. Therefore, we were considering take a withdrawal out of my husbands 401k plan to pay off the credit cards we have used to cover the expenses. I know we will have to pay the penalty for early withdrawal, and we incur the 10% tax penalty. My question is does that 10% of tax penalty count toward our tax liability, therefore allowing us to use part of the IRS Adoption Credit? Thanks so much for your help!
  • I have a client who claimed the adoption credit in 2012. The

    I have a client who claimed the adoption credit in 2012. The couple was only able to use $5029 in adoption credit. They had 2 adopted children who were foreign.

    MY question is, out of the $25,300 available to them in 2012, they used $5029. Where am I utilizing the remaining $20,271 that should be carried forward, on the 2013 tax return?
  • We had mostly completed an international adoption last year.

    We had 'mostly' completed an international adoption last year. The adoption decree has been completed and he was admitted into the US on humnaitrian parole with the stipulation that he return when medically able or within a year to complete the visa process. Since the decree is complete and he has been viewed by the school district and insurance as legally our son are we able to take the adoption credit prior to obtaining the visa? Or must we wait to have the visa complete before taking the credit?
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