Those who have been looking into the adoption process, or have already gone through it, know that it can be both extensive and expensive. Taxpayers who have adopted or are starting the adoption process should review the rules for the adoption credit before filing.
Optima Tax Relief helps taxpayers figure out if they are eligible to claim the credit when filing their taxes:
• The maximum amount of adoption credit individuals can claim on their tax return is $14,300 per eligible child.
• There are certain income limits that could affect the amount of credit that you receive. The credit is based on your modified adjusted gross income (MAGI). The MAGI phaseout begins at $214,520 and ends at $254,520.
• Taxpayers will need to complete Form 8839, Qualified Adoption Expenses. This form can be used to determine how much of the credit can be claimed on a tax return.
• An eligible child must be younger than 18 years of age. If the adopted person is older, they must be physically or mentally unable to care for themselves.
• The adoption credit is non-refundable. This means the amount of the credit is limited to the taxpayer’s taxes due for the tax year. If there is any credit left over after filing, it can be carried forward for up to five years.
• Qualified expenses include:
- Reasonable and necessary adoption fees.
- Court costs and legal fees.
- Adoption-related travel expenses like meals and lodging.
- Other expenses directly related to the legal adoption of an eligible child.
• If the taxpayer and someone other than a spouse each paid qualified adoption expenses to adopt the same child, the $14,300 credit will need to be divided between the two of them.
• There are some expenses that may also qualify even if the taxpayer was paying them prior to having a child that was eligible for it. For example, if a parent pays for a home study at the beginning of the adoption process, the parents can claim the fees as a qualified adoption expense.
• Qualified adoption expenses do not include costs paid by a taxpayer to adopt their spouse’s child.