What is the adoption tax credit?

What is the adoption tax credit?

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  • Answer ✓
    The adoption tax credit is a credit that can be applied to your tax liability to help offset the cost of the adoption. Contrary to previous versions of this tax break, this credit is not in fact a "refund." This credit applies to both domestic and international adoption, as well as foster care adoption. This credit can include qualified adoption expenses such as legal and agency representation, travel, food, accommodations, medical care, etc. This amount currently stands at $13,570 for 2017. 

     In layman's term, each person, depending on their tax bracket, is liable to pay a certain amount of taxes. There are often credits that you might receive such as the child tax credit etc that will offset the amount you owe. The adoption tax credit works in this same way. The amount you paid into an adoption will be applied toward your tax liability. If you do not owe much, you can apply the amount over five years so as to reap it's full benefits. For rules on what qualifies as an adoption expense and other guidelines of the credit, this wiki at adoption.com is great resource! 

    There was some worry in 2017 that the adoption tax credit was going to be no more as it was removed from the House Republican Tax Bill, which drew much upset from conservatives who are primarily pro-life and also those in the adoption community. The adoption tax credit is one of the main reasons why myself as a lower middle-class American was able to adopt two times. It is one of the only way that adoption is made attainable with the high fees associated. Luckily, with pressure from both the pro-life and adoption communities, the bill was dropped and the tax credit saved, at least for now. You can read more about the bill and the fight against it here
  • Answer ✓

    According to the IRS website: the adoption tax credit is a tax benefit for adoption which includes both a tax credit for qualified adoption expenses paid to adopt an eligible child and an exclusion from income for employer-provided adoption assistance. The credit is nonrefundable, which means it's limited to your tax liability for the year. However, any credit in excess of your tax liability may be carried forward for up to five years. The maximum amount (dollar limit) for 2017 is $13,570 per child. For more information you can check out their website at https://www.irs.gov/taxtopics/tc607 or adoptiontaxcredit.com

     In simple terms it is a tax credit that reduces the amount of tax you pay in. If you paid $4,000 in taxes in a given year you would receive that dollar amount back as a tax refund. The tax credit is used the year after the child was officially adopted through the court system. Of course, the tax credit is used for qualified adoption expenses, which include adoption fees, court fees, travel expenses, etc.  Make sure to check with accountant before assuming anything.






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