Claim a tax credit for adopting a child

Business

Discussion

November 14, 2009

By David Compton / guest columnist The Meridian Star Sat Nov 14, 2009, 10:52 PM CST

Are you thinking about opening your heart and your home by adopting a child? Since the adoption process can be a costly one, the federal government provides some significant financial assistance with the adoption tax credit.

Here are some of the basic rules.

— It’s important to remember that we are talking about a tax credit and not a tax deduction. The adoption tax credit is even more valuable since it can reduce your actual tax liability by up to $12,150 for 2009. Any unused credit can be carried forward five years. The adoption credit can also offset the alternative minimum tax.

— Qualifying expenses include agency adoption fees, attorney fees, court costs, and adoption-related travel expenses.

— Nonqualifying expenses include fees to a surrogate mother.

— The adoption credit is subject to phase-out provisions. For 2009, the credit begins to phase out once modified adjusted gross income reaches $182,180, and the credit is completely eliminated at modified adjusted gross income of $222,180.

— The timing of the credit depends on the nature and the progress of the adoption. For domestic adoptions, if the adoption is not finalized by the end of the year, the credit is computed in the second year. For foreign adoptions, the credit is not computed until the year the adoption is finalized.

— Special needs adoptions can be eligible for the maximum credit even if actual expenses are less.

— Some employers provide adoption financial assistance. These proceeds can generally be excluded from taxable income, but the reimbursed expenses can’t also be used to figure the adoption tax credit.

David Compton is a Certified Public Accountant with offices in Meridian and Birmingham, Ala.

Text Only

Business

Business Beat
February 5, 2012
Who has to file a 2011 income tax return
Taxes are a frequent topic of conversation at this time of year, and a common question is, who has to file a tax return? The rules for filing 2011 tax returns are straightforward for most people.

February 5, 2012
Are people really retiring later?
True or false? You may have heard this claim before (or something like it): “Many Americans are being forced to retire later because their savings and investments took a hit in the Great Recession.”

February 5, 2012
What’s your emergency fund range?
Dear Dave,
In your plan, you talk about Baby Step 3 as saving enough to have three to six months of expenses in your emergency fund. My husband and I were wondering how you can determine whether you need to be on the low end or high end of that range?
Amanda

January 29, 2012
Remember ‘nanny tax’
Though it hasn’t made headlines recently, the nanny tax is still around – and it still applies to other household workers in addition to nannies. Here’s what you need to know.

January 29, 2012
Highlight these tax dates on your 2012 calendar
Get out your red pen and circle these dates on your 2012 calendar if any of the following upcoming tax deadlines apply to you or your business.

January 22, 2012
RMD precautions and options
After you turn 70, the IRS requires you to withdraw some of the money in your retirement savings accounts each year. These withdrawals are officially called Required Minimum Distributions (RMDs).

January 22, 2012
Getting off on the right foot in 2012
Every year brings some financial change, so here are some relevant changes relating to investment, tax and estate planning for 2012.

January 15, 2012
Hold your investments where taxes will be lowest
How much does it matter whether you hold your stock and bond investments in a taxable account or a retirement account?

January 15, 2012
Congress extends payroll tax cut for employees
In the end, the Democrats and Republicans in Congress agreed to disagree. Before adjourning for the year, the feuding factions were finally able to set aside their differences to temporarily extend the “payroll tax holiday” for two months.

January 8, 2012
More Business Headlines

Business

Search Results

Discussion

Claim a tax credit for adopting a child

Site Map

Contact Us