adoption credit

Tax

Expanded Adoption Credit

For 2012 the maximum adoption credit per eligible child is $12,650, down from $13,360 in 2011. The credit is no longer refundable and must be used as a credit against tax liability. 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. Special needs adoptions are eligible for the full credit regardless of whether expenses are qualified.

In order to claim the credit however, your modified adjusted gross income (MAGI) must be less than $229,710. This credit is set to expire on December 31, 2012, but can be carried forward over the next five additional years until the credit is used up or the time limit expires. Moving forward, in 2013 domestic adoptions of special needs children are eligible for a tax credit of $6,000.

If you adopted a child this year, or are planning to adopt a special needs child in 2013, you may be eligible for this credit. Additionally, if you adopted a child in 2010 or 2011 and didn’t claim the refundable credit, you may be able to file an amended return. Be sure to contact us if you need assistance. We are here to help.

Tax

8 Ways Children Lower Your Taxes

Got kids? They may have an impact on your tax situation. Here are the top 8 things to consider if you have children.

  1. Dependents: In most cases, a child can be claimed as a dependent in the year they were born. Be sure to let us know if your family increased this year and we’ll take a look at whether you can claim the child as a dependent this year.
  2. Child Tax Credit: You may be able to take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. The Additional Child Tax Credit is a refundable credit and may give you a refund even if you do not owe any tax.
  3. Child and Dependent Care Credit: You may be able to claim this credit if you pay someone to care for your child under age 13 so that you can work or look for work. Be sure to keep track of your child care expenses so we can claim this credit accurately.
  4. Earned Income Tax Credit (EITC): The EITC is a benefit for certain people who work and have earned income from wages, self-employment, or farming. EITC reduces the amount of tax you owe and may also give you a refund.
  5. Adoption Credit: You may be able to take a tax credit for qualifying expenses paid to adopt a child.
  6. Coverdell Education Savings Account: This savings account is used to pay qualified expenses at an eligible educational institution. Contributions are not deductible; however, qualified distributions generally are tax-free.
  7. Higher Education Credits: Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar for dollar, unlike a deduction, which reduces your taxable income.
  8. Student Loan Interest: You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions.

As you can see, children can have an impact on your tax profile. If you’re a parent, we’ll go over your situation with you to make sure you’re getting the credits and deductions you’re entitled to.

Tax

Expanded Adoption Credit

The Affordable Care Act raises the maximum adoption credit to $13,360 per eligible child in 2011, up from $13,170 in 2010. It also makes the credit 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. In order to claim the credit or refund however, your modified adjusted gross income (MAGI) must be less than $225,210.

If you adopted a child this year, you may be eligible for this credit. Make sure you contact us early, though. To claim this tax relief, we must file a paper return, which means your refund will be slower than if you could file electronically.

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Copyright All rights Reserved. Financial Dream Team, like all providers of personal financial services is required by law to inform their clients of their policies regarding privacy of client information. The information in this material is not intended as tax or legal advice. Financial Dream Team, USA, LLC is a registered business in Califronia. Provided content is for informational purposes only.

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