Getting an Additional Tax Break with the Expanded Adoption Credit

The Affordable Care Act provides an adoption credit that's refundable. If you qualify, you can receive a refund even if you don't owe taxes for the year. The amount has been expanded from $12,150 to $13,170 per child for the 2010 tax year. The maximum children you can claim credits for is two. If you're married and file a separate return, you'll have to divide that amount between the two of you. The way to obtain the credit is to file a form and submit the necessary documents related to the adoption of each child whom you're claiming a credit for.

An Eligible Child

Not every child who is adopted is eligible for the purposes of claiming the adopted child credit. The child has to be younger than 18 years old and cannot be a step child. A child older than 18 years old may be eligible if you can show that he cannot mentally or physically take care of himself. The adoption also has to be finalized in the tax year you want to claim the credit for. If it's not, you can claim the credit the following year, as long as the adoption is complete by then.

Finalization of Adoption

There are three ways to prove when the adoption was finalized. Your first option is to obtain a final decree of adoption from the sending country. You could also get a certificate from your Secretary of State. A final possibility is to get a final decree of adoption from a state court.

Form 8839 Qualified Adoption Expenses

You have to submit Form 8839 to claim the adoption credit. The form collects information about the expenses you paid during for the adoption. The expenses have to be reasonable and necessary to qualify for the credit. Some examples of qualified expenses include:

  • Lawyer fees
  • Adoption fees
  • Court costs
  • Travel expenses 

The first section of the form requires that you provide personal information about each of your adopted children, including a social security number or an adoption taxpayer identification number. You have to specify whether your child has special needs, is foreign born or is disabled. You also have to submit documentation related to the adoption along with the form, or you won't be able to get a tax break. As a result, you have to file a paper return because you cannot submit the documentation electronically to the Internal Revenue Service (IRS).

Modified Adjusted Gross Income Requirements

The IRS will only give you a tax break if you meet the modified adjusted gross income (MAGI) requirements stated in the Affordable Care Act. If your MAGI is more than $222,520, you cannot qualify for the adopted credit. You can only get a reduced adoption credit if your MAGI is between $182,520 and $222,520. You can exclude $13,170 per child from your income for adoption benefits that were provided by your employer.



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