Tax Credit May Be Available For Those Who Have Adopted Children From State Custody

Wednesday, February 23, 2011 | 5:33am

More good news for those who have adopted a child from state care.

From the IRS:

In 2010 and 2011, you may be able to take a refundable tax credit for qualifying expenses paid to adopt an eligible child (including a child with special needs). This means that you could qualify for a tax refund even if you did not have federal income tax withheld. For tax years prior to 2010, the adoption credit is not refundable.

Under new Adoption Credit Rules for the 2010 tax year, you must attach one or more adoption-related documents (identified in the form instructions) with the completed Form 8839 (PDF), Qualified Adoption Expenses, and attach the form to your Form 1040 or Form 1040A return, to claim the adoption credit or income exclusion. The required documents are different if the adoption is foreign, or domestic, final or not final and if the adoption is for a special-needs child.

A tax credit, including the adoption credit, reduces your tax liability. For expenses paid prior to the year the adoption becomes final, the credit generally is allowed for the year following the year of payment. For expenses paid in and after the year the adoption becomes final, the credit is allowed in the year of payment. The adoption credit is not available for any reimbursed expense. In addition to the credit, certain amounts paid by your employer for qualifying adoption expenses may be excludable from your gross income.

Follow this link for more information:
http://www.irs.gov/taxtopics/tc607.html


The IRS finalized the instructions that accompany Form 8839 and they are now available online.  To access the IRS form 8839 visit: http://www.irs.gov/pub/irs-pdf/f8839.pdf.  To access the instructions for 2010 visit: http://www.irs.gov/pub/irs-pdf/i8839.pdf.

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