It is that time of year we all dread, income tax time. If you have adopted a child in 2012 or are hoping to adopt a child in 2013, we suggest you educate yourself regarding the federal income adoption tax credit for families. Knowing about the adoption tax credit can help you recoop expenses from your 2012 adoption or help you plan finacially for your adoption in 2013.
Although we are providing you with information on the Federal adoption income tax credit, we remind readers that we are adoption professionals not tax accounants. Please check all information we provide with your accountant or person preparing your taxes.
If you have finalized the adoption of a child(ren) in 2012, you will be subject to the 2012 tax code for the adoption tax credit and you may be eligible for up to $12,970 in the form of a federal income tax credit. If you are planning to adopt a child in 2013 you will be eligible for the adoption tax credit in that year. If you have had an adoption fail and you have paid out fees and lost those fees, check with a tax accountant as you may also be eligible for some of those fees to translate into a federal income tax credit.
The amount of credit depends on your income, your adoption expenses, and upon your tax liability. The range for credit exclusion is between $194,580 and $234,580. Your adoption expenses can include travel (I hope you kept your receipts), application fees, home study fees, placement fees, post placement fees, foreign fees, attorney fees, birth parent expenses and other agency fees. Your tax liability is the amount of federal income taxes you paid in the applicable year.
If you adopt a child with special needs (as defined by law), you can claim the full maximum credit regardless of your expenses and tax liability. If you adopt a healthy child (as defined by law), you can claim the credit up to your tax liability. In 2012 you can claim the tax liability for five years. Beginning in 2013 you can claim the liability indefintly until it is paid off. If your expenses are less than the tax credit and you did not adopt a special needs child, then you can only claim the total of your expenses.
Tax liabilty means that if you have paid $12,970 in federal income taxes, you can claim the total amount in the first year. If you have only paid, for example, $10,000. in federal income taxes in the applicable year, you will have to claim the remainer of the credit in the future allowable years (2012 5 years, 2013 indefinite). If you have no tax liabilty (you have not paid any federal taxes) you will not benifit from this law unless you have adopted a special needs child.
If you have adopted a child, make sure your income tax professional is aware of the adoption tax credit. If you were unaware in 2012, it is not too late to file an ammended form and take advantage of the federal income tax credit for adoption.
Again, we urge to you seek the advice of a professional tax preparer regarding the federal adoption income tax credit.
Family Connections, Inc. is an authorized New York State adoption agency that provides home study services and post-adoption placement support services for families adopting domestically and internationally. The agency also has a domestic infant placement program. To learn more about the agency's services, contact Anita or Renee at 1-800-535-5556 or info@adoptfamilyconnections.org or click below to request a free consultation.
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