Can You Benefit From the Expanded Adoption Credit?

You may be able to take a tax credit in 2011 of up to $13,360 ($13,170 in 2010) for qualified expenses paid to adopt an eligible child. The Affordable Care Act increased the amount of the credit and made it refundable, which means it can increase the amount of your refund. Here are several things you to know about the expanded adoption credit.

1. For tax years 2010 and 2011, the credit is refundable, meaning that you can get it even if you owe no tax.

2. If you claimed the adoption credit in a prior year and have a carryover to 2010, that carryover is also fully refundable in 2010.

3. When claiming the credit, it cannot be e-filed and documents supporting the adoption must be attached. Documents may include a final adoption decree, placement agreement from an authorized agency, court documents and the state’s determination for special needs children.

4. Qualified adoption expenses are reasonable and necessary expenses directly related to the legal adoption of the child. These expenses may include adoption fees, court costs, attorney fees and travel expenses.

5. An eligible child must be under 18 years old, or physically or mentally incapable of caring for himself or herself.

6. If your modified adjusted gross income is more than $182,520, your credit is reduced. If your modified AGI is $222,520 or more, you cannot take the credit.

7. Without Congressional action, this credit will no longer be available after 2011.

If you have questions about this credit and how it might fit into your adoption plans, please give this office a call.