Albuquerque New Mexico Accounting Tax Accountant and Forensic CPA - Changes to the Federal Adoption Benefits Tax credit of up to $13,170 for adopting a child

Dianne Goodman, CPA, FCPA
Comprehensive Small Business Solutions, PC
Business Accounting and Taxes, Individual Taxes and Forensic Services-Elder Abuse, Divorce and Business Fraud
1-888-851-1975 Toll Free or (505) 323-2307 in Albuquerque NM

RSSFEED
ADD TO MY YAHOO

HOME

Feedback
Client Lockbox
ABOUT THE FIRM

Ask Dianne
Tell A Friend

FOR IMMEDIATE RELEASE:

CHANGES TO THE FEDERAL ADOPTION BENEFITS TAX CREDIT FOR ADOPTING A CHILD

The Affordable Care Act (ACA) enacted in March 2010 included an increase to the maximum adoption credit and the maximum amount of employer-provided adoption assistance benefits you can exclude from your income. The Act also extended the tax credit through December 31, 2011.

You may qualify for the adoption tax credit if you adopted a child and paid qualified adoption-related expenses. If you adopt a special-needs child, you may be able to claim the full amount of the adoption credit, even if your out-of-pocket expenses are less than the tax credit amount or if you paid no expenses.

New for 2010 is that the adoption credit is now refundable. This means that for the 2010 tax year, you can reduce your tax to zero and IRS refunds any remaining amount of the credit to you. Before 2010, if your credit was greater than your tax liability, you could reduce your tax liability to zero, but could not get a refund of the additional credit amount and could carry forward the excess credit for up to five taxable years. In 2010, credit amounts carried forward from prior years are refundable.

Calculate and claim the adoption credit and income exclusion

You must now attach one or more documents that support the adoption to your federal tax return. The required documents vary depending on whether the adoption is foreign or domestic, final or not final, and whether the adoption is of a child with special needs.

You must also complete and attach Form 8839, Qualified Adoption Expenses, to your Form 1040 or Form 1040A with the required adoption-related documentation. Include the credit in your total for Form 1040, line 71, and check box b on Line 71.

You have to file a paper federal tax return so that you can attach the supporting documents. Therefore, you cannot file a return with the adoption credit electronically.

Records to keep

Keep the following documents to ensure you get any credit that is allowable:

Receipts for qualified adoption expenses

Entry visas for foreign adoptions

Final decree, certificate or order of adoption

Home study by an authorized child placement agency

Child placement agreements or court orders

Determination of special needs status by a State or the District of Columbia.

Best wishes to you and your new family member!

Go to YEAR END TAX PLANNING FOR INDIVIDUALS for more details on what you can do to prepare your personal taxes for year end.

These are just some tax tips you should consider when thinking about your tax planning.

This article was intended to provide general information about tax planning. It does not contain all the rules and exceptions that may apply to your situation. If you have further questions regarding year end tax planning, I can be reached at www.dgoodmancpa.com.

About the Author

Dianne Goodman, CPA, FCPA - Specializes in servicing Small Businesses and Individuals. Visit www.dgoodmancpa.com for relevant and current information on a variety of financial and tax issues focusing on small businesses and individuals or call at 1-888-851-1975.

CONTACT INFORMATION:

Dianne Goodman, CPA, FCPA
Comprehensive Small Business Solutions, PC
505 323-2307
1 888-851-1975 toll free
www.dgoodmancpa.com