It’s tax time again, and if you are an adoptive parent, there is a credit out there that you should be aware of – the adoption tax credit. Generally, you may apply for this credit whether you have adopted a child within the United States or internationally. The adoption tax credit applies to “qualified adoption expenses.” According to the IRS, these include adoption fees, court costs, attorney’s fees, traveling expenses and other expenses that are “directly related to and for the principal purpose of” the adoption of an “eligible child.” An “eligible child” is one who is under 18 years old or who is physically or mentally incapable of caring for him or herself.
If you haven’t obtained the credit for a previous year, you still have a chance. Generally, the IRS will allow you to amend a previous year’s tax return in order to claim the credit. For tax year 2012, the credit is capped at $12,650 per child. Depending on the qualified expenses you are claiming, you may be able to avail yourself of the entire credit or a portion of it. Note that for tax year 2012, the credit is not refundable. Therefore, you must have tax liability in order to benefit from the credit. In other words, if you were entitled to the full credit, you could reduce your tax liability by $12,650. The 2012 credit will not result in a tax refund if the amount of the credit exceeds the amount of your tax liability. Nonetheless, if you claim only a portion of the credit for 2012, you may carry the remaining credit forward for up to five tax years.
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This article does not constitute legal advice nor does it create an attorney-client relationship. Do not rely on the information contained in this article as an alternative to obtaining legal advice from your attorney or other professional legal services provider. Do not rely on the information contained in this article as an alternative to obtaining tax advice from a qualified tax professional. If you have any questions about any legal matter or tax matter, you should consult your attorney or other professional legal services provider or a qualified tax professional.