[iwantmybaby]

Sorry to ask yet another tax question. I did a search here and found some helpful info, but nothing that answers my question. Which probably means I shouldn't be asking it, but here goes:

Since the final invoice amount from the adoption agency more than covers the credit amount, isn't that all I need to file for the tax credit? I'm thinking turning in all hotel, airlines, etc, expenses won't matter.

Thanks for the help
Tracy

[Devora]

There is no need to turn in anything else. Expenses above and beyond the tax credit are irrelevant. We, too, simply turned in the receipt from our agency. One receipt is simpler than many -- and it was clearly adoption related given that it came from an adoption agency.

[allgodsgrace]

We claimed our entire amount (well over the minimum for the credit) but it was because we wanted to make sure everything was accounted for. I would imagine you would not need to.

I doubt our credit will ever be completely used-- we for 2,000 something last year from it and only about 1300 this year. Anyone know how we can get more from the credit next year?

[avoel]

The invoice is all I saved

[cborsa7]

Yes, as long as you have at least the amount of the credit on the invoice that is all you would need.

[sak9645]

You do not submit any receipts when you file your taxes. Receipts should be kept in case you are audited. However, the IRS is well aware of the cost of international adoption. You are unlikely to be audited on the basis of your adoption, though you could need to produce all records if audited for some other reason.

Sharon

[robandjulie]

This is what we're doing, too, to a point. You can only claim up to $10,650 so that's a fraction of the agency fees, thus we stuck copies of that in our home files with all the W2's, charitable gift reciepts, etc. in case we ever get audited.

However, we are also very blessed in that our company provides adoption benefits and we could submit a certain amount to them for taxable reimbursement. However, the gov't is very clear that you can't claim any fees that are reimbursed and my employer is very clear that you can't get reimbursed for any fees that are taken as tax credit, so I also made a clear note in my tax files for this year and next year (since the reimbursement will be taxed in my '09 file) that from that huge agency fee $10,650 was being claimed on taxes as a credit and this other part was being submitted to my employer for benefits. Originally I had just added up all my receipts for travel and everything and put the grand total on my tax form thinking "eh, let the government know how much this costs in case they ever use the stats to consider upping the credit limit" but then I realized I had to remove the part I submitted to work and so I only put in the receipts that were necessary to cross the $10,650 limit.

[robandjulie]

Originally Posted by allgodsgrace

I doubt our credit will ever be completely used-- we for 2,000 something last year from it and only about 1300 this year. Anyone know how we can get more from the credit next year?

You can only get credit up to the amount you owe in total taxes (not your remaining liability after what your employer takes out, but your actual tax burden), so the only way to claim more would be if you had a bigger tax burden. e.g. make more money. You make money and your employer takes that out to set aside for the government. You can claim back up to all of that amount withheld by using your credit to pay the total taxes owed.

Now, if you want to increase your taxes owed, there are lots of things you could do, but they'd be silly. You could use up your credit but it wouldn't go to your bank.

Basically it goes like this: let's say your family makes enough money to owe the government $2500 in taxes each year. Let's say your employer sets aside $2600 through paycheck withholdings. So you'd normally get $100 back, but since you have adoption credits left you use $2500 from that credit to cover the rest of your burden and so you get the $2500 back as well for a total return of $2600. You "used" $2500 of your tax credit to pay your taxes. The other $100 was just because the government owed you money.

Now, let's say you had been sticking money in an IRA, taking big deductions through itemization, etc. If you stop doing that you can raise your tax burden so that you owe the government a total of $3100. Again, let's say your employer withheld $2600. In a normal year this would mean you owe $500. However, you can use your adoption credit to cover the whole $3100 and you can get your $2600 back. So you use up your adoption credit faster, but it doesn't come back to your wallet (unless you want to keep money out of an IRA right now). It just takes money out of this sort of imaginary "adoption tax credit" account and gives it to the government as an imaginary tax payment.
However, you have a few more years and just in case you pick up a huge raise or a consulting gig or win the lottery, you may want to be careful about not wasting it. If you win the lottery and owe the government a few thousand that adoption credit will cover some portion of it. Dare to dream.

So the only advantage I can see is if you've been killing yourself to set money aside for an IRA you can keep that money free since the tax advantages don't really help you directly. Or if you want to invest in an IRA, maybe go ahead and do a Roth IRA rather than a traditional (or roll your traditionals into a Roth now) b/c the tax deduction is sort of a phantom thing right now and then you won't have to pay taxes on it when you withdraw it in a few decades.

All that said: I'm not an accountant at all, I've just been doing my own taxes and reading all the manuals and such for years. So talk to a CPA and financial advisor about what it might mean to do different things with your investments in the next few years to let your adoption credits pick up the tax burdens that you'd get from that.

[Larue]

The 2008 adoption tax credit is $11,650. And the 2008 income range when the credit phases out is $174,730 - $214,730. If you don't use the whole credit in 2008, the amount that you will carry forward is based on what the credit was when you originally claimed it.

As sak9645 mentioned, you do not have to submit receipts with your tax return but you should hang to them in case you get audited. The IRS has three years to audit your return if they suspect a "good faith" error. And they have six years if they suspect you underreported your income by 25% or more. There is no time limit for an audit if you file a fradulent return or don't file a return when you were required to.

I keep my receipts for three years, since "good faith" errors are what flag the majority of audits.

Happy taxes!