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If a taxpayer adopts a child with special needs, what credit

If a taxpayer adopts a...
If a taxpayer adopts a foster child with special needs, what credit could they qualify for, with or without having paid any qualified adoption expenses? Is the adoption credit only available if the employer has a written qualified adoption assistance program? Thank you.
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Customer reply replied 8 months ago
The adoption became final in 2015
Answered in 57 minutes by:
3/29/2017
Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 482
Experience: Former IRS Revenue Agent
Verified

Dear Customer,

The adoption credit is available for adopting a domestic, U.S. citizen and resident, child with special needs, as determined by the State for the adoption credit purpose, even if there is no adoption expenses. The credit is non-refundable but can be carried forward for up to five years.

There is no need for employer program. The below IRS links have examples with the adoption couples but no mention of employer's plan at all. The employer program is for the exclusion criteria to not include in income for adoption assistance paid by the employer.

It seems that you need to amend the 2015 tax return.

The third link below has a clearer explanation, even if it uses 2014 as an example.

"Families who finalized in 2014 the adoption of a child who has been determined to have special needs can claim the full credit of $13,190 as their expenses, regardless of their actual adoption expenses. The credit for all other adopted children is based on the family’s qualified adoption expenses."

The 4th link is IRS Form 8839 instruction: -- Be aware, this is a 2016 example,

"Special needs adoption.

If you adopted a U.S. child with special needs and the adoption became final in 2016, enter on line 5:

$13,460, minus Any qualified adoption expenses you used to figure any adoption credit you claimed for the same child in a prior year. This is the amount you entered on line 3 of Form 8839 for this child. If you didn't claim any adoption credit for the child in a prior year, enter $13,460 on line 5 even if your qualified adoption expenses for the child were less than $13,460 (and even if you didn't have any qualified adoption expenses for this child)", then, "Adoption credit. Use Form 8839, Part II, to figure the adoption credit you can take on Form 1040, line 54 or Form 1040NR, line 51. Check box c on that line and enter “8839” in the space next to box c."

https://www.irs.gov/businesses/small-businesses-self-employed/adoption-credit-glance

https://www.irs.gov/taxtopics/tc607.html

https://www.nacac.org/taxcredit/taxcredit2014.html

https://www.irs.gov/pub/irs-pdf/i8839.pdf

Regards,

Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP, IMTA

Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 482
Experience: Former IRS Revenue Agent
Verified
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