[Ann07]

Can anyone tell me how the adoption tax credit works. Do you get the money back or is it a percentage? Trying to come up with funds for our next adoption

Thank you,

Ann

[cocomfs]

We were just looking at this ourselves.
From what we understand say you pay 8,000 in taxes, and then you get a tax deduction for the child you have say of 3,000. So now all you owe in taxes is 5,000 so that is what you will get back from the Adoption tax credit. And you will continue to get that each year until you reach the max. But remember if in 2009 you have two children you will get even a bigger tax deduction leaving you owing even less taxes for the credit. Hope this makes sense.
This is just how my husband and I are reading it - I could be way off.
Collette

[sambob]

I strongly suggest that everyone hoping to take advantage of the adoption tax credit will talk to a qualified tax professional first. Not everyone qualifies for the credit (based on income). A lot of agencies will have you believe that "you'll get the money back when you file your taxes." It is not that simple. You may get some of the money back, but there are a number of factors at play, and it's spread out over a number of years.

[Ann07]

How do I figure this out. Is there a site. I can call H& R block, but they are hard to get ahold of when it isn't tax season. Is there a website somewhere?

[ocracoke]

Ann,

It is hard to figure out. Leet me give you an example that may give you an idea.

Keep in mind that your adoption tax credit is based on your income and your tax LIABILITY and the amount your adoption cost.

The adoption tax credit starts to phase out at a certain income -- which I don't know since it is much higher then I make. And I have heard that self employed people can't use it but I don't understand this.

So during the year you have taxes taken out of your paycheck. Lets say you had $5000 removed during the course of the year. Then you do your taxes at the end of the year and discover that your tax liability is actually $4000. You would normally get a $1000 tax refund -- you over paid $1000 based on your liability. With the adoption tax credit you would get your liability back as well -- so your refund would be the entire $5000 -- your overpayment plus your liability. This means that you used $4000 of your adoption tax credit. Assuming your adoption tax credit is $11000 this would mean that you now have $7000 of credit left that will be carried over to the next year. You have up to 5 years to use the tax credit.

Not sure how tht translates into figuring out your own taxes. Taxes change when you have a child. I went from single to head of household. I claimed her as a dependent. I claimed child care expenses. I got an earned income credit. But I went from getting a refund of about $400 each year to getting a refund of about $5000 each year. I have used the adoption tax credit for the last 2 years and I have probably 2 more years worth left -- based on my income and liability.

Hope that helps some. And it is always wise to talk to a tax expert.

Samantha

[sambob]

Yes, it is very confusing. And you take the tax credit for the year you paid adoption-related expenses - not necessarily when you're done with the whole process (unless you've done the whole adoption, from beginning to end, in a single tax year). It doesn't matter if you've finalized yet or not. The tax credit is per adoption for a single child, not per attempt (you don't get additional credit for failed adoptions).

[DPline]

For international, you can only begin to take the credit after your adoption is final.