How does the adoption credit work? Do you actually get a $10,000 refund? My husband and I just found out that not only do I have problems, but he does also. We are still in the beginning stages of deciding whether or not to do an IVF procedure. We decided that in the meantime, we would start the adoption process with the State of Florida because there is no charge for the parenting classes or the homestudy. So therefore, when the adoption question comes up I was just wondering how to afford attorney fees, agency fees, etc... then someone told us about the tax credit, but I don't know how it really works. Thanks for any help.
I'm not totally clear on the whole credit thing either....hopefully someone will shed some light on this. I've heard that you get the money back in your check and I've heard that you don't.
It's hard to come up with the money, but thankfully, our agency breaks down the fees in to smaller amnts due at different times, like homestudy, pre placement, post placement, etc. Hope you are able to figure out the financing!
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You do get a tax credit. It can be up to $10,000.00. When you file....you will get the credit. After you have your child in your home. Just like if you had a baby. You may or may not get the whole thing. It's nice though because adopition is not cheap...as we all know. But the nice thing is you can put this away to use if you do another adopiton.
Kelly
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Andrew 4/21/2000 26 weeks
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I understand that you get a tax credit, but what does that mean exactly? My husband and I usually have to pay, so will that decrease the amount by $10000 and whatever is left is a refund?
LET ME TELL YOU- the adoption credit is WONDERFUL- we just got our tax return today- and we got ALL of the $10,000 and we usually pay in too!
if you make- I think it was under (combined) $100,000 AND you spent $10,000 on adoptioin "things" then you can apply it-
say you only used $8,400- then you can apply that amount- only-
just have to keep reciepts of all the adoption transactions- as the tax guy siad- we'll probably be audited- but then they'll see the adoption credit.. SO...
I posted a link a few weeks ago with the link for IRS that explains the tax credit. Run a search here or go to the IRS site www.irs.gov and run a search for adoption credit.
If you pay $10,000 in taxes in the year your adoption is final, you will get a tax credit of $10,000. The adoption must be final in most cases, otherwise you have to wait for the next tax year to claim that credit. You need to keep all receipts of your adoption expenses, because there are some expenses that might not qualify. If you pay $8k toward your taxes in the year, your adoption credit will be $8 for that year and then you can carry the other $2k over to the next tax year. You can carry the $10k over up to 5yrs.
We're in the process of adopting right now, but if the child is not "home" before 12/31/04, we cannot begin using the adoption tax credit until we file our taxes in 2006!!
The $10,160 is PER child up to a max of $20320.00.
To sum up:
It's based on how much your tax liability is, NOT simply how much your adoption costs.
You can claim it only AFTER the adoption is final.
It can be carried over for a max of 5yrs (until you exhaust it).
There is an income limit (like you don't get full $10k if your income is over $100-150k).
Save ALL receipts, even for postage or long distance phone calls if you have to mail documents back and forth or whatever, it all counts as long as the expense goes to making the adoption happen.
Also note, if you receive any reimbursement (ie get funds from the state towards a state-system child) or employer reimbursement, your tax credit is minus those deductions.
Thank you so much for all of your help... I guess where I am confused is say you only have to pay $1000 in taxes and your tax credit is for $10000, does that mean that you will get $9000 back in the form of a return?
No. If you pay $1000 in taxes, your credit will be $1000 this year. Then you *may* be able to get another $1000 tax credit for the next 4yrs.
You won't get a fat $9k refund.
This is a tax credit, not a tax refund. It's a credit toward what you owe.
They're not paying you to adopt. They're helping alleviate your tax burden because you adopted. Otherwise everyone would adopt if it meant they could make some fat free money. LOL
Thank you, that is what I thought until I saw a post by Jen-Duck answering my question... she said that she got a $10000 refund... I was wondering how that was possible.
Jen did not say she got a $10k refund. She said she got the entire $10k credit at one time. It's possible to get a $10k refund, but you'd have to SERIOUSLY overpay your tax debt during the year and make a pretty nice income.
In other words, Jen has some pretty good household income to qualify for getting the entire credit in one shot.
Gotta look at the tax tables to see what your tax liability is based on your income.
Hehe, my mom is a professional tax preparer (for 25yrs) who is also an Enrolled Agent with the US Treasury Dept. Go mom! It's only thanks to her that I can even halfway understand this. LOL
What I know most of all, is that our son has GOT to be home by 12/31. We are adopting internationally. So no matter what, even tho our adoption might be 99% paid for with in a few months, if lil EVan doesn't come home til next year...we are in for a long wait before that credit even applies. Sigh.
Good luck with your adoption research. And welcome to the forum, by the way.
Robin
__________________ Robin
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me (33), hubby Derek (38)
short & fat, but cute!
No more treatment after 2.5yrs treatment and 3 mc's
Well congratulations to you... I hope all goes well and your little boy is with you shortly... we are still having to jump through the hoops with adoption, especially internationally mainly because so many of the countries require you to be 25... I am only 23. My husband is 30 and they still say that both spouses must be 25. I can't wait until we can say that we are matched with a baby and waiting for him/her to come home.. Once again congratulations
You can be 23 for Panama, FYI. At least through Commonwealth International according to their website www.commonwealthadoption.org. I found my agency through the resources sticky up top here.
It's not always the countries rules, it can also be the specific agency's rules about the age. So keep asking different agencies that you're interested in.
Adoption Credit 
