March 13, 2013
Adoption Tax Credit
We’re a month away from taxes being due, and if you’ve still yet to file and are available for the adoption tax credit, here are a few tips to keep in mind before you file:
Topic 607 – Adoption Credit and Adoption Assistance Programs
Tax benefits for adoption include both a tax credit for qualified adoption expenses paid to adopt an eligible child and an exclusion for employer-provided adoption assistance. For tax years 1997 through 2009, the credit was nonrefundable. For 2010 and 2011, the credit was refundable. For tax year 2012, the credit has reverted to being nonrefundable, with a maximum amount (dollar limitation) of $12,650 per child.
Qualified adoption expenses
Qualified adoption expenses for both the credit and the exclusion 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 that are directly related to and for the principal purpose of the legal adoption of an eligible child. An eligible child must be under 18 years old, or be physically or mentally incapable of caring for himself or herself.
Are you a same-sex couple? Has one partner adopted the child of another? You may qualify for “second parent adoption” grants!
While same-sex couples are excluded from many tax benefits, there is one tax break they qualify for that opposite-sex married couples don’t — if they adopt a partner’s child.
A tax credit for what is known as a “second parent adoption” grants qualifying taxpayers up to $12,650 per child for certain expenses.
Do you know what forms you need to file? There’s a handful, so you want to make sure that you have every base covered:
Form 8839 is the form you need to file. The form will include expenses covered by the Adoption Tax Credit, any payments or reimbursements you may have received from Employer Adoption Assistance Benefits, and your child’s Social Security or Tax ID number (required for filing).
- To take the credit or exclusion, complete Form 8839 (PDF),Qualified Adoption Expenses. You will attach Form 8839 to Form 1040 (PDF) or Form 1040A (PDF) and report the credit on line 52 of Form 1040 or line 34 of Form 1040A.
- Visit the download page to view and/or download the forms you’ll need for adoption-related tax filing. Forms are available in various formats, and include:
- Form 8839 – for itemizing qualifying adoption-related expenses.
- Form SS-5 – to apply for a Social Security Number for your child.
- Form W-7 – to apply for an Individual Taxpayer ID Number (ITIN) if your child is a resident or non-resident alien who does not qualify for an SSN.
- Form W-7A – to apply for an Adoption Taxpayer ID Number (ATIN) if you are in the process of adopting a US citizen or resident, and cannot get an SSN until the adoption is final.
There’s a great deal of information to go over, so make sure you know everything you need to file. If you’re looking to receive an adoption tax credit for 2012, this may be a good year to work with an accountant to do your taxes. This is an excellent benefit for adoptive families – everyone deserves their right to the adoption tax credit if eligible.