Adoption
Tax Credit
|
by Jill C. Hobbs,
CPA
Elliot & Warren, PLLC
|
 |
A tax credit exists for those who are
attempting to adopt a child. An income exclusion also exists
for employees whose employers provide an adoption assistance
program which provide adoption benefits to the employees.
The credit and exclusion amounts are each $10,630 for 2005
and $10,960 for 2006. A taxpayer can take both of these benefits
as long as they are not taking the credit and exclusion for
the same expense paid.
This article focuses on the individual tax credit available
to taxpayers. The credit is available for "qualified expenses"
paid in an adoption attempt.
Qualified 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
whose principal purpose is for, the legal adoption of
an eligible child
Eligible child:
-
under 18 years old or
-
physically or mentally incapable of
caring for himself or herself
Non-qualifying expenses include expenses paid:
-
that violate state or federal law
-
for carrying out any surrogate parenting
arrangement
-
for the adoption of your spouse's child
-
using funds received from any federal,
state or local program
-
allowed as a credit or deduction under
any other federal income tax rule, and that were reimbursed
by your employer
The taxpayer cannot take more than the
tax liability showing on the individual's tax return. The taxpayer
can however; carry the unused credit forward for five years
or until the credit is used up (whichever comes first). The
credit is available for each effort to adopt a child.
Modified Adjusted Gross Income limits:
-
$159,450 or less for 2005 ($164,410
or less for 2006) - no affect on credit or exclusion
-
$159,451-$199,449 for 2005 ($164,411-$204,409
for 2006) - reduces your credit or exclusion
-
$199,450 or more for 2005 ($204,410
or more for 2006) - eliminates credit or exclusion
The year in which the credit can be taken is different for children who are U.S. Citizens or residents at the time the effort to adopt begin.
Please contact Jill Hobbs at (704) 333-8881
for further information.
|
