Adoption tax credit for dummies!

foreverbride

Ok, can someone explain the adoption tax credit to me?  I realize that we will not be given a lump sum of $11K in our hands in April, so how does it work.  We currently get about $7K back in taxes each year (we choose to claim less so that we get more back at the end of the year).....

noonecarewhoiam

The adoption tax credit is a dollar-for-dollar reduction in your overall tax liability for the year in which your adoption was finalized. Currently, the amount is right around $11K.

So when you file your taxes, there is a line item that has your total tax liability for the year. This number is either smaller (you get a refund) or greater (you own) than the amount of money you had withheld from your paychecks. The tax credit reduces your liability, which makes the amount you owe smaller, or the amount of your refund greater.

If your tax liability for the year is <$11K, you can carry over unused portion of the tax credit for up to 5 (?) years.

Just know, if you plan to adopt from Korea, that the credit is only available the year of FINALIZATION, which will be at least 6 months after your child is home. If your child comes home in 2009 but you don't finalize the adoption until 2010, you don't get the credit until 2010 (although you can claim the child as a dependent).

HTH.

Dr.Loretta

HTH

https://www.adoptivefamiliesmagazine.com/articles.php?aid=377

From what I read in this, if you get a refund in the year you'd take the tax credit, you can carry that credit forward for the next 5 years.

BabySweetPeasMom

We're still working it out ourselves for taxes from last year.  We are using Turbo Tax and it talks you through it- including if the adoption wasn't finalized by the end of the year (obviously in our case, as our little guy was born on Christmas day). 

We get part of it back this year (we don't hit the max yet), and then will get the rest back next year.

noonecarewhoiam

I believe there is a difference for domestic and international adoptions--especially in regard to adoptions that don't come through. Turbo Tax does do a great job of walking you through it--it's totally easy for that part (but not for filing without a child's social security number!).