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Did you know there is an Adoption Credit?

October 4, 2010

Tax Professionals are often asked “why would I spend money and hire you when I can do it myself?” And the number one answer we give is simply that Tax Professionals know much more about tax law and most importantly about various write offs and credits with in the tax code.

When we are in tax school they (the Teaching Professionals) teach us via the tax return. They dissect the tax return, give numerous tax scenarios, tax code along with it and then put it all back together like a 1 million piece puzzle. How’s that for a visual! Why I love tax work is simply because it is just like a puzzle. Every client represents a different picture on the puzzle box and depending on how complicated your tax picture is depends on what piece number you get. Okay so that is vague but still fun for me.

One such piece of the puzzle has to do with the Adoption Credit.  Most people do not know anything about the credit or that there is even a credit. Most folks that go to an adoption agency are told that there is a credit simply because it costs so much money to adopt a child that the agencies want to show you there is a light at the end of the tunnel, and not just the child. Here are some basics about the credit. The form you use is Form 8839 Qualified Adoption Expenses (here is the pdf f8839) In 2009 the qualified expenses were $12,150 but for the tax year 2010 that amount is raised to $13,170 per child. What else is new for 2010 is that the credit is refundable, meaning that eligible taxpayers can get it even if they owe no tax for that year. In general, the credit is based on the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees, and travel expenses. Income limits and other special rules apply. Once again, more pieces of that puzzle. Taxpayers that claim adoption expenses need to include one or more of the expense documents with their return, so they will need to paper file their returns, and because of paper filing they will receive their refund (if there are refunds) six to eight weeks after filing.

Certainly not every Taxpayer adopts a child and can claim this credit, but this is one more example of why it is preferred to use a Tax Professional to do your taxes…we know all the pieces of the puzzle. Call us at 212-979-6830 to set up a free tax consultation or visit us at our website to learn more about us. We look forward to meeting you!


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