Adoption Tax Credit is Sweetened by Health Care Reform (at least for US taxpayers)
IRS gives adoption credit a breath of fresh air
At the risk of being called Captain Obvious, I’ll just say it… financing adoption is expensive. However, the United States Government recently gave the nod to adoptive parents by sweetening the adoption credit for 2010 and 2011. The credit has now become refundable. Now, you can call me Captain Obvious but you can’t call me an accountant or tax lawyer so please check with your professionals for more details related to your specific situation. Here are some basic guidelines of the new provisions based on the interim IRS Guidelines (Notice 2010-66):
· Even better than a tax credit is a refundable tax credit! Most tax credits are nonrefundable meaning that they only reduce your tax liability to zero. A refundable tax credit, like the $13,170 adoption tax credit, means that you can “cash out” any remaining money.
· Carryover credits are refundable also! Prior to the new provisions, carryover credits were merely carried over to offset the next year’s taxes. Any credits now carried over from previous years may be included on your 2010 return. See the draft IRS guidelines at draft version of the 2010 Form 8839, Qualified Adoption Expenses.
· Beginning in 2010, adoptive parents will have to provide documentation to substantiate the finalization of the adoption. Acceptable documents
The bad news (if you call it that): is that, because documentation is now required, it is not possible to file electronically. I’d pay a stamp to get $13,170. Be sure you check with your tax professional for specifics for your situation. Happy adoption tax season!
