To qualify for the adoption credit, you must pay or have paid qualified adoption expenses for an eligible child. An eligible child is defined under federal law as an individual who is under 18 or is physically or mentally incapable of self-care.
Notably, expenses related to a surrogate parenting arrangement, the adoption of a spouse’s child, and other provision of adoptions or funds that violate state or federal law are not considered qualified adoption expenses.
Understanding the intricacies of the form and the adoption tax credit can be challenging. Here are additional information and tips that can make your journey smoother:
While the adoption credit is a significant financial benefit, it’s essential to understand its limitations. The credit is nonrefundable, meaning it can reduce your tax liability to zero, but any excess credit cannot be refunded. However, any unused portion of the credit can be carried forward to the next tax year.
For families adopting a child with special needs, additional considerations come into play. Under federal income tax law, a child with special needs is a child who the state determines cannot or should not be returned to their parent’s home and a special needs child who likely won’t be adopted unless assistance is provided. For qualified expenses for these adoptions, you may be eligible to claim the full amount of the adoption credit, regardless of the actual amount of paid qualified adoption expenses.
Filing the form involves several steps:
If your employer provides adoption assistance benefits, these can also affect your tax situation. Employer-provided adoption benefits are amounts your employer pays directly to either you or to pay a third party for qualified adoption expenses under a qualified adoption assistance program. You must report these benefits on the form and they are excluded from your gross income.
" Undoubtedly one of the best eSignature application available in the market right now. Would love to recommend Fill. "
Ready to get started
with this template?