Posts Tagged ‘Adoption’

Did You Have Adoption Expenses in 2011?

Friday, March 2nd, 2012

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

Six Facts for Adoptive Parents 

 

If you paid expenses to adopt an eligible child in 2011, you may be able to claim a tax credit of up to $13,360.

Here are six things the IRS wants you to know about the expanded adoption credit.

1.   The Affordable Care Act increased the amount of the credit and made it refundable, which means you can get the credit as a tax refund even after your tax liability has been reduced to zero.

2.   For tax year 2011, you must file a paper tax return, Form 8839, Qualified Adoption Expenses, and attach documents supporting the adoption. Taxpayers claiming the credit will still be able to use IRS Free File or other software to prepare their returns, but the returns must be printed and mailed to the IRS, along with all required documentation.

3.   Documents may include a final adoption decree, placement agreement from an authorized agency, court documents and/or the state’s determination for special needs children.

4.   Qualified adoption expenses are reasonable and necessary expenses directly related to the legal adoption of the child. These expenses may include adoption fees, court costs, attorney fees and travel expenses.

5.   An eligible child must be under 18 years old, or physically or mentally incapable of caring for himself or herself.

6.   If your modified adjusted gross income is more than $185,210, your credit is reduced.   If your modified AGI is $225,210 or more, you cannot take the credit.

For more information see the Adoption Credit FAQ page available at www.irs.gov or the instructions to IRS Form 8839, which can be downloaded from the website or ordered by calling 800-TAX-FORM (800-829-3676). 

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Important Information for All Parents

Tuesday, January 24th, 2012

The exclusive purpose for the information which is provided from this website is to disseminate  information, and not to provide tax advice.

IRS Reminds Parents of Ten Tax Benefits 

Your kids can be helpful at tax time. That doesn’t mean they’ll sort your tax receipts or refill your coffee, but those charming children may help you qualify for some valuable tax benefits. Here are 10 things the IRS wants parents to consider when filing their taxes this year.

1. Dependents In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

2. Child Tax Credit You may be able to take this credit for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.

3. Child and Dependent Care Credit You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.

4. Earned Income Tax Credit The EITC is a tax benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. IRS Publication 596, Earned Income Credit, has more details.

5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents.  For details, see the instructions for IRS Form 8839, Qualified Adoption Expenses.

6. Children with earned income If your child has income earned from working, they may be required to file a tax return. For more information, see IRS Publication 501.

7. Children with investment income Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate. For more information, see IRS Publication 929, Tax Rules for Children and Dependents.

8. Higher education credits Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar. See IRS Publication 970, Tax Benefits for Education, for details.

9. Student loan interest You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970.

10. Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent. For more information, see the IRS website.

Forms and publications on these topics are available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

 

Adoption Expenses

Thursday, February 17th, 2011

If you had expenses in 2010 that were related to the adoption of a qualified child (under the age of 18 or someone who is physically or mentally incapable of taking care of themself), you may be elibigle for a refundable tax credit of up to $13,170.00 per qualified child or person.  “Refundable” means that you will receive the credit even if you do not have a tax liability.  For example, if your tax liability is $10,000 and your credit is $12,000, with a nonrefundable adoption credit the tax credit would reduce your tax liability to $ 0.00 and you would be required to carry the remaining $2,000 tax credit forward for your tax return next year.  In the same situation with a refundable adoption tax credit, your tax liability would be reduced to zero, but you will also receive a tax refund for $2,000.00 which is the amount  by which your tax credit amount exceeds your tax return liability.

If you believe that your 2010 adoption expenses will qualify, you’ll need to complete Form 8839 (Qualified Adoption Expenses) and attach the completed form to your 2010 Federal tax return.  Be sure to review your state income tax return instructions to determine if your state follows the Federal law.  Written documentation is required to support your claim.  Therefore, you can not e-file.  Instead, you will  have to paper-file your 2010 tax return.

Qualified adoption expenses are reasonable and necessary adoption fees. They include:

  • court costs,
  • attorney fees,
  • traveling expenses (including amounts spent for meals and lodging while away from home), and
  • other expenses directly related to the legal adoption of an eligible child.

There are additional points to be considered:

  • The instructions for Form 8839 are only eight pages in length.  Links to the form itself, the instructions, and “Frequently Asked Questions” (FAQs) are provided below;
  • The full amount of the adoption tax credit will begin to be reduced if your total “modified adjusted gross income” reaches $182,252.00 and will be completely eliminated at the $222,520.00 income level;
  • The tax credit must be reduced (offset) by employer provided adoption benefits;
  • Adoption expenses associated with the adoption of your spouse’s children or a surrogate parenting arrangement are not eligible to be included;
  • Expenses which are associated with a foreign adoption (where the child was not a U.S. citizen or resident at the time the adoption process began) will qualify but only if you actually adopted the child.

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