Qualified Adoption Expenses

Aug 01, 2014 By Nielsen Law Group In Taxation No Comment Tags : , ,

If you are a new parent through adoption, then please accept our heartfelt congratulations.  And better yet, did you know the Internal Revenue Code provides for a tax credit, or an exclusion from taxable income, for certain qualified adoption expenses? In fact, you might be eligible to claim both.

 

You can claim a credit for certain adoption expenses if the adoption of your U.S. child became final in the tax year for which you’re filing the return.  You also can claim a credit for adopting a special needs child, as well as a foreign child.  If your employer provided adoption benefits for you, then you can exclude those benefits from your income.

 

For a child to be eligible, the child must be under 18 years of age or turn 18 in the tax year for which you’re filing.  Also, it applies to any disabled individual (regardless of age) who is physically or mentally unable to take care of himself or herself.

 

The types of adoption expenses that qualify are:

  • Adoption fees,
  • Attorney fees,
  • Court costs,
  • Travel expenses (including meals and lodging) while away from home, and
  • Re-adoption expense relating to the adoption of a foreign child.

 

Adoption expense does not include any expenses incurred that were reimbursed by a government agency, violate the law, carrying on a surrogate parenting arrangement, were reimbursed by your employer or were allowed for another type of credit in the Internal Revenue Code.

 

There are certain income limits that apply.  For tax year 2013, if your modified adjusted gross income is more than $234,580 you may not use the credit or exclusion.  The amount of these tax benefits phase out when your modified adjusted gross income is between $194,581 and $234,579.  If your modified adjusted gross income is $194,580 or less you can use the full benefit of the exclusion or credit.  The maximum for both the adoption credit and the adoption exclusion for employer-provided benefits are $12,970 per eligible child in 2013.

 

If you have recently adopted a child and need to know if the adoption credit or exclusion applies to your situation, then schedule your free consultation by calling (480) 888-7111 or submit a web request here.