Adoption isn't cheap, whether one is spending a few thousand for home studies, a couple thousand in birth mother expenses or even more in travel fees to an adoptee's country of origin. Once all is said and done, the service fees and expenses can run upwards of $40,000. That's a tough total to budget, especially when an individual or couple is starting or expanding their family. Fortunately, adopters can claim their adoption expenses on their taxes and receive up to a third of their fees in their tax return. In 2010, the maximum amount refunded could reach up to $13,170.
Tax credits, unlike federal or states subsidies provided for public adoptions, can be awarded regardless of the child's special needs and health. Qualifying the adoption tax credit does, however, require the adopter have paid out of his or her own pocket for the adoption of a child under 18 years old. It cannot be applied to surrogate services or fees as well as stepparent adoptions. The credit also is inapplicable to expenses that have already been paid for or reimbursed by the federal or state government subsidies, as is common for public adoption home study fees. The credit also does not apply to any adoption fees paid before 1997.
To calculate and receive the credit, adopters much fill out IRS Form 8839. The Form 8839 will need to then be attached to Form 1040. The tax credit amount should be entered on Form 1040 on line 52 with "box b" marked off.
Claiming one's tax credit can be done any time after an adoption is finalized, although sometimes adopters may have to wait up to a year before filing for the adoption tax credit. This is more likely to be true for those who adopted internationally. International adoptions are eligible for a tax credit only after the adoptee is issued a visa. This can delay the adoption finalization if the child was adopted from a country, such as Korea, that does not finalize its adoptions in-country. Other delays may occur if a state requires a child whose adoption was finalized overseas be, essentially, "re-adopted" in the state courts.
Canada Promotes Expanded Adoption Tax Credit
More adoption-related expenses will be made eligible for the Adoption Expense Tax Credit, under reforms introduced by the Canadian Government.IRS audits thousands of adoptive families
A report from the IRS's Taxpayer Advocate Service says that 90 percent of families who claimed the adoption tax credit during the 2012 filing season had their returns flagged for further review. Nearly 70 percent had at least a partial audit of their tax return.
IRS Targeted Adoptive Families Over Tax Credit; Little Evidence of Fraud Found
Families who adopted orphans and claimed the adoption tax credit were, like conservative and pro-life groups, targeted by the Internal Revenue Service. In 2012, 90 percent of those families were asked to provide additional information and 69 percent of them were audited. There is no evidence,...AUDITING ADOPTION?Report: 70 Percent of Claims Flagged by IRS
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ADVOCACY ALERT: Take action today, on Tax Day!
April 15, 2013, 11:39 am
ADVOCACY ALERT: Take action today, on Tax Day! Email your members of Congress with the message, "We are so grateful for your support of making the Adoption Tax Credit permanent, but more must be done! We urge you to reinstate the refundable provision, which was in place in 2010 and 2011, so...International adoption tax credit + IRS; adoptive families audited
May 23, 2013, 8:06 am
[url=http://www.nationalreview.com/corner/349077/irs-morality-defend-planned-parenthood-deluge-adoptive-families-audits-david-french]IRS Morality: Defend Planned Parenthood, Deluge Adoptive Families with Audits | National Review Online[/url] Just thought this was an interesting article. I posted...
Should I challenge the subsidy determination?
April 20, 2013, 9:52 am
We just received our subsidy determination (we never even filled out paperwork, but I guess the SW did) for post-adoption of our FD. It said that due to her birth history, she "qualifies" for a subsidy but that it won't be implemented until she develops a "special needs condition" related to that...
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