[rickjann]

OK, I've read almost every post here and I'm still confused. There seems to be two different opinions on the tax credit.
I'll just give you my example and see what you think.
Our adoption cost will be around $12,000. Between my wife and I we will pay in around $11,000 in federal taxes this year. The tax credit is $10,000.
We have taken out a 2nd mortgage to pay for adoption expenses and were planning on paying off most of the 2nd mortgage with the refund. Now as I understand it, either we WILL get a refund check or will NOT get a refund of $10,000???
Originally I was under the impression that we would get a refund of the $10,000 we put out for the adoption costs because we obviously paid in more than that amount to the Fed.
I've read all the posts on it being a "no-refundable" tax credit. But what good would that do at all???
Is the federal government saying that my wife and I should have claimed 9 all year and NOT paid into fed. taxes (IE: take home as much as you can from every paycheck) and that's the only way you will make out from this tax credit?
We normally get a refund of around $1,000. So after taking the credit, if it's "non-refundable", then we should expect this year to get back the same? ($1,000)
If it is truelly "non-refundable" it just seems like we are being punished for paying in to the fed. on every paycheck.
It just doesn't make any sense. Are there any CPAs on the board or someone with the IRS who can absolutely clarify this? Or even someone who has filed and received (or not received) a refund?
TIA

[Brat]

try this site: adoptionlearningpartners.org.

[dkbw]

Hi

The "non refundable credit" means yes it's a tax credit but no you won't get back any extra money for it, like earned income credit is a refundable credit which means you can potentially get back way more money in your tax refund then you paid in in federal taxes.

This is how it works, if your tax liability is 11,000 as you say then you'll get a 10,000 tax credit. What you need to look at is how much did you already pay in in federal taxes that were withheld from your pay check, that's what your refund will be, less the 1000 difference. Your correct in your thoughts of claiming 9 and not paying in the money in federal taxes each paycheck. You will get what you paid in back you just have to wait until you file your tax return.

A few things to consider, your adoption has to be final in order to take the tax credit. Also if you don't use the whole 10,000 tax credit you can carry forward any remaining amount to next year.
It's a good tax credit being that there are only a few that you can carry forward to next year.

Other things now that you have children, is you will be eligiable for the child tax credit, any day care expenses can get you a tax credit also and then the earned income credit too. It just depends on what you may or may not qualify for.

I hope this helps. If you need any more info let me know.

[rickjann]

So, to cut to the chase. I WILL receive a refund check from the federal govt. for the $10,000 because I paid in more than $10,000 to them over this year?
Am I correct or not?
Thanks for the replies.
Has anyone here already taken the credit, and if so, how did it work out for you?

[tobeafamily]

Rick - you are correct. If your tax liability for the year within your adoption is FINAL (must finalize by 31 Dec 2003 to qualify for this year's tax filing) exceeds $10,000 and you spent more than $10,000 in allowable costs for your adoption, then you will get a check for $10,000 back from the IRS.

If, however, your tax liability does not exceed 10,000, then you will get that amount refunded and be able to carry over the difference to your next filing year. For example, if you owe $8,000 in taxes, you will take $8,000 of your credit and carry $2,000 over into your next filing year.

If you did not spend $10,000 in allowable expenses on your adoption, you are only eligible to take up to the allowed amount in a tax credit.

For more info, see this site:

http://www.irs.gov/taxtopics/page/0,,id%3D16260,00.html

HTH

Regina, AMom to Ryan Joshua Thomas

[Shoshana]

If I spend, say $12,000 in 2003, and another $9000 in 2004 when the adoption is final, will I still get to take a $10K credit or only a $9K credit?

[tobeafamily]

$10K. Expenses can accrue over multiple years before the adoption is final. You can only file for it, though, in the year you finalize.

HTH

Regina, AMom to Ryan Joshua Thomas

[rickjann]

tobeafamily:
Thank you! It will sure help us out to receive the refund and take a huge chunk out of our 2nd mortgage.
Now I just hope we can get the adoption finalized before the end of the year. The BMom is due Oct. 25th and our state has a 90 day period before it can be finalized. But our attorney said that sometimes it can be speeded up through the courts. Also, the BMom had her last child 3 weeks early and she said this pregnancy "feels" the same to her. So she actually could go at any time now!
Thanks again for the replies!

[dreaminkel]

I thought that as long as you are adopting domestically, you don't need to be finalized to claim the credit? Only if you are adopting internationally do you need to be finalized?
Don't know, but that is what it sounded like to me.
Kel

[tobeafamily]

Our understanding is that your adoption must be final before you are eligible for the tax credit, domestic or international. You should check with your tax preparer or the IRS though.

[dreaminkel]

It is stated in the paperwork :

The adoption credit or exclusion cannot be taken for a child who is not a United States citizen or resident unless the adoption becomes final.

But you CAN, if the baby is a US citizen, take it before it is finalized.

Here is the info on the web site~

http://www.irs.gov/pub/irs-pdf/p968.pdf

page 3/4 has the info on when to take the credit or exclusion.

This gives a lot of info and how the "credit" works.
Thanks,
Kel

[tobeafamily]

OK, reading the full document, not just the section on foreign children:

If the child is a US Citizen (i.e. born in the United States or born of biological parents who are US Citizens):

IF you pay qualifying expenses in any year before the year the adoption becomes final then you can file for expenses the year after the year in which the payment is made (i.e. if you spent it in 2002 but didn't finalize in 2002, then you can file for it in tax year 2003).

If you pay qualifying expenses in the year your adoption becomes final, you file in the year that the adoption becomes final.

If you pay qualifying epxenses in any year after your adoption becomes final, then you file for them in the year which you make payment.

Remember, the IRS allows you to take a credit for qualifying expenses to adopt a child that is a US citizen, (see "Dollar Limit", page 2) regardless of whether that attempt results in a finalized adoption. BUT if the adoption doesn't finalize in this tax year, you have to wait until the end of tax year 2004 to file, which is when you would file if it didn't finalize at all (or finalized in 2005). Either way, if the adoption doesn't finalize this year, you can't file for expenses this year.

Got it?

Regina

[dreaminkel]

I won't argue about this, just check with your tax advisor. They will help you understand the legal terms and wording. Make sure you check, if you don't check you will lose out.
Kel

[joymom]

Thought I'd post since we've used the adoption tax credit twice and received a check both times (back when it was 6k instead of 10k). So, yes, it really does work, and yes your 2nd mortgage should be looking much better Our attorney have us the impression that having the adoption finalized before the end of the year was important...but I'd suggest talking to a CPA who really understands it.

One thing we did discover, though, is that you must get a social security number first (I guess I shouldn't have been surprised, but I was a busy new Mom and it never occured to me!). You can also get (what I think they called) a tax ID # which is like a temporary ss#, but we went to our local SS office and it only took a couple weeks to get their permanent cards.

Congratulations on a match, I hope all goes smoothly for you.

[Mommy Tsunami]

We adopted through the county and we had no expenses, they paid all of the attorney fees, etc. However, we are still eligible for the tax credit and are expecting the entire credit back since we've paid $14,000 in federal taxes this year. It doesn't matter if you paid anything for the adoption, the credit is an incentive to adopt a domestic, special needs child.

This was verified with our attorney and CPA.