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  #1  
Old 05-25-2011, 10:21 AM
SoundMessage SoundMessage is offline
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Adoption Tax Credit for Relative Adoption Finalized in 2012?

I have a few questions about the Adoption Tax Credit, as I've seen some conflicting information from various sources.

1) If my wife and I adopt my wife's sister's child, do we qualify for the tax credit?

2) Baby is due in October, which as I understand things, means we won't be able to "finalize the adoption until 2012. What are the details of the Adoption Tax Credit for the 2012 TAX YEAR, which we will file by 15 April 2013?

3) Although the adoption will be finalized in 2012, the majority of our expenses will occur in 2011 (i.e., in legal fees leading up to and around the birth of the child). Is there any way to claim any of these expenses on our 2011 TAX YEAR return (which we will file by 15 April 2012)? Or will we really have to wait a whole additional year to receive the refund related to these expenses??

4) I've heard that in tax year 2012, the Adoption Tax Credit is no longer "refundable". However, if our tax liability is, for example, $10,000, and we have $5000 in qualified expenses (just picking simple numbers here), then whether or not the credit is "refundable" has no effect on our refund amount, right? Or, put another way, our qualified expenses would need to exceed our tax liability in order for us to benefit from the "refund-ability" of the tax credit, right??

Thanks for any help in clarifying these issues for me.

Last edited by SoundMessage : 05-25-2011 at 10:25 AM.
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  #2  
Old 05-28-2011, 04:07 AM
eagleswings216 eagleswings216 is offline
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Quote:
Originally Posted by SoundMessage
I have a few questions about the Adoption Tax Credit, as I've seen some conflicting information from various sources.

1) If my wife and I adopt my wife's sister's child, do we qualify for the tax credit?

Assuming you have expenses to claim, yes.

Quote:
Originally Posted by SoundMessage
2) Baby is due in October, which as I understand things, means we won't be able to "finalize the adoption until 2012. What are the details of the Adoption Tax Credit for the 2012 TAX YEAR, which we will file by 15 April 2013?

You are correct, your finalization will not take place until 2012 sometime. Most states have a period of time before you can file for finalization, and then you have to wait for the court to do its thing. For example, in our state (VA), the adoption petition can be filed 6 months after placement. We adopted our boys at birth and they were 9.5 months by the time all the paperwork got through the courts, etc.

Quote:
Originally Posted by SoundMessage
3) Although the adoption will be finalized in 2012, the majority of our expenses will occur in 2011 (i.e., in legal fees leading up to and around the birth of the child). Is there any way to claim any of these expenses on our 2011 TAX YEAR return (which we will file by 15 April 2012)? Or will we really have to wait a whole additional year to receive the refund related to these expenses??

Expenses are claimed either the year AFTER they are paid, or the year you finalize. So yes, your 2011 expenses cannot be claimed until 2012 taxes. In your case, that will also be your finalization year.

Quote:
Originally Posted by SoundMessage
4) I've heard that in tax year 2012, the Adoption Tax Credit is no longer "refundable". However, if our tax liability is, for example, $10,000, and we have $5000 in qualified expenses (just picking simple numbers here), then whether or not the credit is "refundable" has no effect on our refund amount, right? Or, put another way, our qualified expenses would need to exceed our tax liability in order for us to benefit from the "refund-ability" of the tax credit, right??

The credit will no longer be refundable in 2012 unless Congress changes it. That means that you can only claim as much of the credit as you have in tax liability. So if you paid 10k in expenses, but only have 5K tax liability, then you can only claim 5K that year. The rest of your expenses can be carried over and claimed the following year in the same way, for up to 5 years, until you use up either the tax credit amount OR the amount of expenses you have documented.

Hope this helps!
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  #3  
Old 12-27-2011, 12:34 PM
kb50 kb50 is offline
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Petition to make the adoption tax credit refundable for 2012 and 2013

Help make the adoption tax credit fully refundable for 2012 and 2013 by going to Change.org and sign the Economic Justice Petition: Make adoption fully refundable for the 2012 and 2013 tax year. Your signature is needed. Economic Justice Petition: Make adoption costs fully refundable in the 2012 & 2013 Tax Years | Change.org
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  #4  
Old 04-23-2012, 10:30 AM
kb50 kb50 is offline
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Making Adoptions Affordable Act

There is now a Bill called "Making Adoptions Affordable Act" that has been introduced by Iowa rep Bruce Braley that would permanently expand the adoption tax credit to $13,360 and make it refundable.

Last edited by kb50 : 04-23-2012 at 10:32 AM.
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  #5  
Old 12-23-2012, 04:38 PM
randj randj is offline
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Question about 2012 Tax Credit

"The rest of your expenses can be carried over and claimed the following year in the same way, for up to 5 years, until you use up either the tax credit amount OR the amount of expenses you have documented."

I've read nothing that says you can claim the 2012 credit for up to 5 years. Are you sure this is true? We are looking to claim the credit but we have very little if any taxable income...
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