Adoption is a beautiful thing. Many families want to add on to their love and have another child come and join them. Some of these families have a few children already but feel that they could share their love with someone else who needs their help. Others may have tried for years to have a child and their final hope is to bring in one or two children through the process of adoption. No matter the path that led you to go through an adoption, it is a great process that can change the lives of so many.
Despite how great this process can be, it is going to cost quite a bit. Working through adoption agencies can take years and the costs can often turn a lot of potential parents away from the whole idea. This can be even more trying for those parents who worked with in vitro and other methods in order to expand their families and all of these methods failed. In order to encourage more families to adopt and bring a new addition into their homes, the IRS has added an adoption credit that you can receive if you finish up an adoption during the tax year.
If you did an adoption this tax season and would like to learn about this credit and how it can affect your taxes, make sure to talk to a local tax professional. They can help to explain this credit to you and how it is going to affect your tax return. Make sure to contact them today.
What is the Adoption Credit?
The adoption credit is a credit that you can claim on your tax return if you finished an adoption in that tax year. You will not be able to claim the credit if you are currently undergoing the process, but have not completed the process, of adoption. This is one place where many people get confused. They assume that they can deduct the costs as they go, but you will need to save your receipts and other information to get this credit later on.
Once the adoption is completed, you will be able to claim this credit, with the help of your tax professional. Make sure to keep all of your receipts and other information that is needed to help prove that you did go through the adoption and to help show how much you paid. While there are some income limits as well as a limit to the adoption credit amount, this is a great way for many families to afford an adoption that wouldn’t be possible otherwise.
Figuring out how much the credit is going to be able to help you or how to claim this credit is sometimes difficult. Your tax professional will be able to go through the process with you and ensures that all the information is put in at the right time to maximize the credit for you.
The Amounts of This Credit
The amount that you are able to save on this credit is going to vary year to year. This amount usually will go up in order to keep up with inflation prices every few years, so you will need to check and see how much you will be able to claim on this credit. For 2016, the credit was just under $14,000 for the whole adoption. Keep in mind that there are also some income level requirements that you will need to meet as well.
The credit that you can receive is the maximum amount. If your adoption costs anything over that amount, you will be the one who has to pay the bill. You can’t push it on to other years to lower the cost or try to claim more than the maximum. In addition, if your adoption costs under the credit amount, you will only be able to claim the amount that you spent. Both way, this is a great credit that can help adoption become more affordable before and it is meant to help more parents choose adoption.
Claiming on Your Tax Return
Claiming the adoption credit on your tax return is easy. As long as the adoption was finished in the tax year you are working on, you will be able to work with your tax professional in order to make the claim. You will need to bring in all of the paperwork and receipts that you are given from the adoption agency and elsewhere that prove when the adoption was done and how much you spent to get it to completion.
Once the paperwork is all in place, your tax professional will be able to go through the information and help you to put the numbers in the right place. You can also work with them to fill out the other important parts of your tax return and see what deductions and credits you qualify for in addition to the adoption credit.
Credits and deductions, like the adoption credit, are meant to help you save money on your tax bill each year. But finding all of these savings is not always the easiest tasks. Hiring a tax professional right at the beginning can make a difference when it comes to saving as much money as possible on your tax return. Contact our offices today and see how much money we can save you at the end of the year.
Joseph J. Gormley CPA