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Adoption Tax Credit Can Help Cover Costs

September 26th

As costly as raising a family can be under traditional circumstances, adopting can be even pricier. For some families, the cost of adoption is actually prohibitively expensive. However, if you are considering adoption, don’t be dissuaded by costs, as there are ways to defray certain expenses. The IRS’s Adoption Tax Credit is a great means of reducing adoption-related expenses.

Parents may claim the Adoption Tax Credit to cover certain adoption expenses. At the moment, the credit could amount to as much as $13,170. In addition, for the 2010 and 2011 tax years, a provision in the recent health care reform act makes the Adoption Tax Credit refundable. This means that even if you owe no taxes to the IRS, you are still eligible to receive this credit as a tax refund.

Qualifying for the Adoption Tax Credit

Families may qualify if they adopted or attempted to adopt a child in the 2010 or 2011 tax years, and paid qualifying expenses related to that adoption. Taxpayers with a modified gross income of more than $182,520 in 2010 may not qualify for the full tax credit amount. The tax credit begins to phase out entirely for taxpayers with gross incomes in excess of $222,520.

The credit may be available to families who began proceedings, but the adoption never became final. Likewise, families who adopt a special-needs child are usually eligible for the full tax credit amount, even if the actual adoption expenses are minimal. A tax attorney can assist in determining if your case qualifies for a tax credit, as well as the amount you can expect.

“Qualified adoption expenses” are those that may be considered reasonable and necessary expenses. They must be directly related to the legal adoption of a child under 18 years of age, or incapable of caring for his or herself either physically or mentally. Such expenses may include adoption fees, court costs, travel expenses, or even attorney fees.


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