[Genevieve]

Hello-

I was wondering if anyone can tell me which to which tax year the adoption credit is applied. Is it the year in which Gotcha Day occurs, or do you have to wait until things are finalized in the US?

For example, if Gotcha is in December of 2006, can we apply the tax credit to the year 2006 or do we have to wait until something happens in the US, like some kind of finalization, which would obviously occur in 2007.

Thanks!

[rastachris]

My understanding is that the tax credit could be taken for the tax year in which your child comes home. I also believe that if you have adoption-related expenses in 2004 for a child who doesn't come home until 2006 (like the homestudy and other such expenses), the credit can be used for expenses incurred in those years also. It's always good to ask your tax guy or gal about the adoption tax credit rules, or go to the IRS Website.

Good luck!

[hjdeth]

disclaimer first...I am not an accountant, but do have 4 IA children and have dealt extensively with this credit.

For International Adoption: The credit can only be taken after a finalized adoption. So, if you have expenses from an earlier adoption attempt you will only be able to claim them WHEN you finalize an adoption and IF your unreimbursed adoption expenses are under $10k. Since most IA cost way more than $10k, even after employer reimbursements the chances of using any of the expenses from the failed adoption are pretty small.

When to use the credit depends on which country you are adopting from and when the adoption is FINALIZED. For example, if you are adopting in 2006 and your child enters the US on an IR-3 visa, then the adoption was finalized in the foreign country and you claim the credit on your 2006 taxes (early 2007 filing). On the other hand, if you are adopting from a country like Guatamala or India where the children are escorted or only 1 parent can travel and the child enters the US on an IR-4 visa, you have to finalize the adoption in your home state before the child becomes a US citizen and before you can claim the tax credit. So...adoption in 2006, but finalized in US in 2007 means claim on 2007 taxes (early 2008 filing).

Hope that helps,