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TAX TIP No. 45
Uncle Sam can help pay some adoption costs
Raising kids is expensive. And if you're trying to adopt, it can cost you even more.
But there is tax help available. Parents
can claim a tax credit that covers some adoption expenses.
For 2008 returns, the credit could be as much as $11,650.
The exact year you can claim your expenses
depends on several factors, including when the expenses
were paid, when the adoption was finalized, and even
whether your new son or daughter is a U.S. citizen or
resident.
Domestic vs. foreign adoptions
If the child you adopt is
U.S.-born or a resident, there
are Internal Revenue Service
guidelines on when you can
take the credit.
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| When to claim the adoption tax credit |
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| Any year before the year the adoption becomes final. |
The year after the year of the payment. |
| The year the adoption becomes final. |
The year the adoption becomes final. |
| Any year after the year the adoption becomes final. |
The year of the payment. |
Court costs, adoption charges, attorney fees and travel
expenses are some of the items covered by the credit.
The rules for a foreign adoption are slightly
different. In these cases, any costs you incur cannot
be taken until the year the adoption is final. Once
your adoption of a foreign-born child is completed,
any expenses you pay after that can be claimed the year
they are paid. With domestic adoptions, you can claim
your expenses even if the adoption never is completed.
The final adoption date -- and availability
of the tax credit -- in cases involving non-U.S.-born
children depends on when the foreign-born child receives
an "immediate relative," or IR, visa from the Department
of State. Since there are various types of IR visas,
check out Internal
Revenue Announcement 2005-45 for details that could
affect your particular circumstances.
Special rule for special needs cases
An adoption is considered
a special needs case when
the child is a U.S. citizen
or resident when the process
begins and the state or District
of Columbia has determined
that the youngster should
not or cannot be returned
to his or her family.
The governing jurisdiction also must rule
that because of special factors, assistance is required
to place the child with adoptive parents.
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Updated: March 10, 2009 |
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