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Video: Tax Credits When Adopting a Child

Updated for Tax Year 2013


Note: This credit is no longer a refundable credit as of 2013.

If you are in the process of adopting a child or even considering it, you may be interested to hear about a federal tax credit that can save you a lot of money on your taxes. Watch this video to find out more about what tax credits you may be able to receive when you are adopting a child.

Hello, I’m Tammy from TurboTax, with important news about the federal adoption tax credit.

If you are in the process of adopting a child or even considering it, you may be interested to hear about a federal tax credit that can save you a lot of money on your taxes. The process of adopting a child usually comes with a substantial number of expenses. Fortunately, the IRS may allow new adopting parents to reduce their tax bill on a dollar-for dollar basis for a significant amount of adoption expenses.

Generally, the typical expenses you will incur include court fees, fees paid to an adoption agency, the cost of hiring an attorney and all expenses you incur when it’s necessary for you to travel away from home. In order to take the credit, you can only file your tax return on a 1040 form and you must calculate the amount of credit you’re eligible for on Form 8839. However, if your employer reimburses you or pays for any of your adoption expenses, you can’t include those amounts in your tax credit. This also applies to the financial assistance you receive from other organizations or government agencies. It is also important that you take the credit in the right year—it won’t always be the year you pay the adoption expenses. Unless the adoption is finalized in the same year you pay the expenses, you must wait until the year after paying the expenses to take the credit. And if you continue to make payments for these expenses once the adoption is final, you can take the credit in the same year you pay the expenses.

The best part about the adoption credit is that it’s refundable. If you find that the sum of your adoption credit and the tax payments you make during the year exceed the tax you calculate on your return—the IRS will refund the difference to you. One last thing to remember is that you can still take the adoption credit even if you’re never able to finalize the adoption. However, you will only qualify for the credit in this situation if the child you try to adopt is a U.S. citizen or resident.

When you file with TurboTax, we’ll ask you simple questions about your adoption expenses and determine how much of the adoption credit you’re eligible for.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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