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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15732
Experience:  15years with H & R Block. Divisional leader, Instructor
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I am trying to figure out with the adoption tax credit and

Customer Question

Hello, I am trying to figure out with the adoption tax credit and the military adoption credit will the full amounts be refunded in the form of a tax refund check?
Submitted: 2 years ago.
Category: Tax
Expert:  Robin D. replied 2 years ago.


Tax benefits for adoption include both a tax credit for qualified adoption expenses paid to adopt an eligible child and an exclusion for employer-provided adoption assistance.

The adoption credit is nonrefundable, which means it is limited to your tax liability for the year. That means it reduces your tax amount but is not sent to you itself as a refund.

If you adopt a U.S. child that a state has determined to have special needs, you are eligible for the maximum amount of credit or exclusion for the year the adoption is final, even if you did not pay qualified adoption expenses.

When you state MILITARY ADOPTION CREDIT I think you really mean the reimbursement that is offered through DFAS.

Federal law authorizes reimbursement for certain expenses associated with adoption to a maximum of $2000 per child and not to exceed $5000 per calendar year. In order to qualify for the reimbursement, service members must be serving on continuous active duty for at least 180 days and the adoption must be finalized while on active duty. In addition, the claim must be submitted while on active duty and within 1 year of the date that the adoption was finalized.

It takes approximately 4-6 weeks for a determination to be made. For claims that are approved, payment will be issued via direct deposit.

The credit is claimed on your tax return but you have to reduce the the expenses by amounts reimbursed from employer.

I hope this is helpful.

Expert:  Robin D. replied 2 years ago.
Please advise if you need clarification.
Customer: replied 2 years ago.
I'm trying to clarify I am military income and I'm trying to figure out if I was to buy a home and adopt a child will it balance out for tax refund purpose? Doing within a year.. Income one home sold is 120k-140k and adoption credit is up to 30k why would
Expert:  Robin D. replied 2 years ago.

The adoption credit is just going to reduce your tax liability. It can reduce it to zero so you would receive a refund of your withholding but you would not get a refund of the adoption credit amount itself.

The adoption credit would reduce the tax on the property that was sold ,yes.

Customer: replied 2 years ago.
technically it would be better to do it all in the same year for tax purposes?
Expert:  Robin D. replied 2 years ago.

It would certainly work (the adoption credit) to reduce tax in the same year.

If that was your main home for 2 out of the last 5 years prior to sale you can use your Main Home Exclusion ($250,000 for single and $500,000 for joint) on the gain first.

There is a law that allows persons on qualified extended duty in the U.S. Armed Services or the Foreign Service to suspend this five-year test period for up to 10 years of such duty time.

Customer: replied 2 years ago.
it wouldn't help in the same year? If I haven't live in for 2 years out of 10 I don't qualify
Expert:  Robin D. replied 2 years ago.

Yes it would help (the adoption credit). The additional for military was to exclude the gain (without using any other credit like the adoption credit).

The 10 years is for personal use so yes, that is right you cannot exclude.