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IRS Form 8839: Qualified Adoption Expenses

IRS Form 8839: Qualified Adoption Expenses

Uncle Sam gives taxpayers the allowance to reduce their tax bill with a credit for adoption expenses that qualifies provided one meets some qualification requirements.  Form 8839 is essential to report the qualified adoption expenses.

People who have adopted a child or tried to attempt one can testify the huge expense it entails. The silver lining is that one can offset the tax bill using credit for the qualified adoption expenses.


Eligibility for Qualified Adoption Credit

Anyone that paid qualified adoption expenses to adopt a kid who is a citizen or resident of the U.S. might qualify for the credit. This is possible even if the adoption process is ongoing or it was completed in another tax year. Also, paying expenses to adopt a foreign kid might qualify one for credit. Separate rules on Form 8839 guide people that adopt a child with special needs.

The maximum credit for each kid is $14,300 as of 2020. The adoption tax credit is not a credit that is refundable. As a result, for one to recognize the full benefit that will come from the credit, the entire credit must be the same as the credit. As an example, for someone with a total tax in a year of $10,000 who spends $14,000 on qualified adoption expenses, this person can save $10,000 on taxes. When the entire credit is not exhausted, one can carry the remaining amount forward for five years at least. 

As a general rule, from most tax credit from Uncle Sam, one's eligibility for the credit reduces as the income rises. For the 2020 tax year, anyone can claim the entire credit provided the modified AGI (Adjusted Gross Income) is $214,520 or less. This credit decreases as one's income increases and disappears for income above $245,520


Qualified Adoption Expenses 

One needs to be aware of several expenses when filing Form 8839 to claim the qualified adoption expenses. Here are expenses that qualify for adoption:

  • The fees charged by the adoption agency for the process

  • Any legal fees paid as part of the charges of an attorney

  • All expenses incurred in the court and for the re-adoption process that has to do with adopting a foreign kid. 

All expenses incurred, such as travel expenses, hotel costs, and food while on a trip away from home, are expenses one can include. Any amount the employer reimbursed, fees paid to a surrogate mum, or costs that come from adopting spouse's kid cannot be reimbursed


Reporting Form 8839

On calculating your qualified adoption expenses, one needs to report the total value in the second part of Form 8839. There will also be additional info in the second part one needs to provide before estimating the credit. Sample information is the previous tax years in which you already took the credit alongside the amount of your modified AGI (Modified Adjusted Gross income).


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