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People who adopt may benefit from this special tax credit

3/26/2021

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The adoption process can be expensive. Fortunately, the adoption tax credit can help offset some those expenses Taxpayers who adopted or started the adoption process in 2020 should review the rules for this credit.

Here are some facts to help people understand the credit and if they can claim it when filing their taxes:

  • The maximum adoption credit taxpayers can claim on their 2020 tax return is $14,300 per eligible child.
 
  • There are income limits that could affect the amount of the credit
 
  • Taxpayers should complete Form 8839, Qualified Adoption Expenses. They use this form to figure how much credit they can claim on their tax return.
 
  • An eligible child must be younger than 18. If the adopted person is older, they must be physically or mentally unable to take care of themselves.
 
  • This credit is non-refundable. This means the amount of the credit is limited to the taxpayer's taxes due for 2020. Any credit leftover from their owed 2020 taxes can be carried forward for up to five years. 
 
  • Qualified expenses include:
    • Reasonable and necessary adoption fees.
    • Court costs and legal fees.
    • Adoption related travel expenses like meals and lodging.
 
  • Other expenses directly related to the legal adoption of an eligible child.
 
  • If the taxpayer and someone other than a spouse each paid qualified adoption expenses to adopt the same child, the $14,300 credit must be divided between the two of them.
 
  • Expenses may also qualify even if the taxpayer pays them before an eligible child is identified. For example, some future adoptive parents pay for a home study at the beginning of the adoption process. These parents can claim the fees as qualified adoption expenses.
 
  • Qualified adoption expenses don't include costs paid by a taxpayer to adopt their spouse's child.

More information:
About Form 8839
Adoption Taxpayer Identification Number

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"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720
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Monarch Accounting Group Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527-7836
Email: Info@MonarchAccountingGroup.com


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