Do You Qualify for the Adoption Credit?
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by Israel Torres, DEC 07, 2007 |
Taxpayers who adopt a child may be able to take a nonrefundable credit for qualifying expenses paid to adopt an eligible child (including a child with special needs).
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The amount of the credit can be as much as $10,960 depending on modified adjusted gross incomes (MAGI). The income limit on the adoption credit or exclusion is based on your modified adjusted gross income (modified AGI). If your modified AGI is below the beginning phase out amount for the year of $164,410, the income limit will not affect your credit or exclusion. If your modified AGI is more than the beginning phase out amount for the year which would be an income level above $164,410, your credit or exclusion will be reduced. If your modified AGI is above the maximum phase out amount for the year which is $204,410 your credit or exclusion will be eliminated. |
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The adoption credit is an amount that will be subtracted from your tax liability. Although the credit generally is allowed for the year following the year in which the expenses are paid, if a taxpayer paid qualifying adoption expenses in the current in which the adoption became final in the current year, he may be eligible to claim the credit on the current year return. The adoption credit is not available for any reimbursed expense. In addition to the credit, certain amounts reimbursed by your employer for qualifying adoption expenses may be excludable from your gross income.
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For both the credit or the exclusion, qualifying expenses include reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging while away from home), and other expenses directly related to and for which the principal purpose is the legal adoption of an eligible child. An eligible child must be under 18 years old, or be physically or mentally incapable of caring for himself or herself. The adoption credit or exclusion cannot be taken for a child who is not a United States citizen or resident unless the adoption becomes final. An eligible child is also a child with special needs if he or she is a United States citizen or resident and a state determines that the child cannot or should not be returned to his or her parent's home and probably will not be adopted unless assistance is provided. Under certain circumstances, the amount of your qualified adoption expenses may be increased if you adopted an eligible child with special needs.
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For both the credit or the exclusion, qualifying expenses include reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging while away from home), and other expenses directly related to and for which the principal purpose is the legal adoption of an eligible child. An eligible child must be under 18 years old, or be physically or mentally incapable of caring for himself or herself. The adoption credit or exclusion cannot be taken for a child who is not a United States citizen or resident unless the adoption becomes final. An eligible child is also a child with special needs if he or she is a United States citizen or resident and a state determines that the child cannot or should not be returned to his or her parent's home and probably will not be adopted unless assistance is provided. Under certain circumstances, the amount of your qualified adoption expenses may be increased if you adopted an eligible child with special needs.
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