• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • Services
    • Accounting
    • Payroll
    • Tax
    • Compliance
    • Incorporation Services
    • CFO & COO Services
  • About Us
  • Pricing
  • Contact Us
  • Consult
  • Pay Bill
Indian CPA | Virtual Tax Consultancy serving all over US

Indian CPA | Virtual Tax Consultancy serving all over US

Indian Tax Consultant serving across all 50 States

  • Personal Tax
  • Personal Tax FAQ
  • Personal Finance
  • Personal Finance FAQ
  • Subscribe to Indian CPA

Big Tax Break for Adoptive Parents

June 6, 2017 by Roy Vargis CPA CMA CFM EA CITA ACMA CGMA Leave a Comment

Article Highlights: 

  • Qualifying Adoptions
  • Credit Amount
  • Credit Carryover
  • Qualifying Expenses
  • High-Income Credit Phase-out
  • Employer Adoption-Assistance Program

If you are an adoptive parent or are planning to adopt a child, you may qualify for a substantial income-tax credit. The amount of the credit is based on any expenses incurred that are directly related to the adoption of a child under the age of 18 or a person who is physically or mentally incapable of self-care.

This is a 1:1 credit for each dollar of qualified expenses up toa maximum for the year, which is $13,570 for 2017 (up from $13,460 in 2016). The credit is nonrefundable, which means it can only reduce tax liability to zero (as opposed to potentially resulting in a cash refund). But the good news is that any unused credit can be used for up to five years to reduce future tax liability.

Qualified expenses generally include adoption fees, court costs, attorney fees and travel expenses that are reasonable, necessary and directly related to the adoption of the child, and may be for both domestic and foreign adoptions; however, expenses related to adopting a spouse’s child are not eligible for this credit. When adopting a child with special needs, the full credit is allowed whether or not any qualified expenses were incurred. A child with special needs is, among other requirements, a child who the state has determined (a) cannot or should not be returned to his or her parents’ home and (b) that the child won’t be adopted unless assistance is provided to the adoptive parents.

The credit is phased out for higher-income taxpayers. For 2017, the AGI (computed without foreign-income exclusions) phase-out threshold is $203,540, and at the AGI of $243,540, the credit is completely phased out. Unlike most phase-outs, this one is the same regardless of filing status. However, the credit cannot be claimed by taxpayers using the filing status married filing separately.

If your employer has an adoption-assistance program, up to $13,570 of reimbursements by the employer are excludable from income. Both the tax credit and the exclusion may be claimed, though not for the same expenses.

If you think you qualify for this credit or are planning an adoption in the future, please contact this office for further credit details and to find out how this credit can apply to your particular circumstances.

Filed Under: Personal Tax, Tax related

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Primary Sidebar

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

More to See

January 2020 Individual Due Dates

January 2, 2020 By Roy Vargis CPA CMA CFM EA CITA ACMA CGMA

How Can I Prove Financial Hardship to the IRS If I Can’t Pay My Taxes?

January 2, 2020 By Roy Vargis CPA CMA CFM EA CITA ACMA CGMA

Footer

Recent

  • Individual and Business Provisions of the CARES ACT
  • January 2020 Individual Due Dates
  • How Can I Prove Financial Hardship to the IRS If I Can’t Pay My Taxes?
  • Is Your Will or Trust Up-to-Date?
  • Understanding Tax Lingo

Search

Copyright © 2022 · Magazine Pro on Genesis Framework · WordPress · Log in