legal adoption

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.

Can You Take the Child Tax Credit?

If you have a qualifying child under the age of 17, you may be able to take the Child Tax Credit. Here’s what you need to know.

1. Amount. With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under age 17.

2. Qualification. A qualifying child for this credit is someone who meets the qualifying criteria of seven tests: age, relationship, support, dependent, joint return, citizenship and residence.

3. Age test. To qualify, a child must have been under age 17 — age 16 or younger — at the end of 2011.

4. Relationship test. To claim a child for purposes of the Child Tax Credit, the child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

5. Support test. In order to claim a child for this credit, the child must not have provided more than half of his/her own support.

6. Dependent test. You must claim the child as a dependent on your federal tax return.

7. Joint return test. The qualifying child can not file a joint return for the year (or files it only as a claim for refund).

8. Citizenship test. To meet the citizenship test, the child must be a U.S. citizen, U.S. national or U.S. resident alien.

9. Residence test. The child must have lived with you for more than half of 2011. There are some exceptions to the residence test, found in IRS Publication 972, Child Tax Credit.

10. Limitations. The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies by filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax and any alternative minimum tax you owe.

11. Additional Child Tax Credit. If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

Questions about the child tax credit? Give us a call today.

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.

Scroll to top