The Law Office of Stephen Ross in Pottstown provides comprehensive and compassionate assistance for families seeking to adopt in southeastern Pennsylvania.
Tax Credit for Adoption Expenses
You may be able to get a tax credit for qualifying expenses paid to adopt an eligible child. The adoption credit is an amount subtracted from your tax liability and is not allowed for any reimbursed expense. Also, certain amounts reimbursed by your employer for qualifying adoption expenses may be excludable from your gross income.
These expenses include reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses, including amounts spent for meals and lodging while away from home, and other expenses that are directly related to the legal adoption of a child. The adoption credit cannot be taken for a child who is not a U.S. citizen unless the adoption becomes final. These credits have dollar limits and income limits. For instance, the adoption tax credit is $12,170 for tax year 2010. Also, the beginning phase out based on adjusted gross income is $182, 520 in 2010 and is totally eliminated at modified AGI of $222,520. Modified AGI includes student loan interest, tuition and fees that were deducted from AGI, and payments from an employer's adoption assistance program.
This credit may not be claimed for stepparent adoptions. Also, you may not use expenses as a credit or deduction that were incurred as a result of an unsuccessful adoption attempt.
How to Take Advantage of Tax Benefits
In order to take advantage of the tax benefit, you must obtain from the Internal Revenue Service (IRS) an adoption taxpayer identification number. This is necessary when the adopting parents do not have or are unable to obtain the child's Social Security number. This number is to be used by the adopting taxpayers on their federal income tax return to identify the child while the final adoption is pending.
You should apply for the adoption taxpayer identification number when the adoption is a domestic adoption, the child is legally placed in your home for adoption by an authorized agency, the adoption is not yet final, and you qualify to claim the child as a dependent.
As soon as the adoption becomes final, a person should obtain a new Social Security number for the child and inform the IRS so the adoption taxpayer identification number is no longer used and deactivated by the IRS.
Contact Our Montgomery County, Pennsylvania, Adoption Lawyers
For more information about the tax aspects of adoption, Contact us to schedule a consultation with our Pottstown attorneys. We serve families in Montgomery County, Chester County, Berks County, Philadelphia County, Lancaster County and surrounding counties in Pennsylvania.