An adoption tax credit is the tax credit offered to adoptive parents to encourage adoption. Section 36C of the United States Internal Revenue Code offers credits for "eligible adoption fees" paid or incurred by individual taxpayers.
According to the Internal Revenue Service (IRS), "The tax benefits for adoption include both tax credits for eligible adoption fees paid to adopt eligible children and exceptions for employer-provided adoption assistance". For fiscal years 1997 to 2009, the credit is non-refundable. For 2010 and 2011, credits can be refunded. For the 2012 tax year, the credits have been returned to non-refundable. The American Taxpayer Relief Act of 2012 enacted on 2 January 2012 extends the adoption tax credits permanently. For 2014, the maximum non-refundable tax credit (dollar limit) per child is $ 13,190. Credit begins to cease when customized gross revenue modification (MAGI) exceeds $ 197,880 and is eliminated when MAGI exceeds $ 237,880. The tax credit is claimed on the IRS 8839 Form Qualified Adoption Cost.
Video Adoption tax credit
History of Inception Tax Incentives
The tax credit limit amount is based on the year of adoption completed and claimed on the IRS 8839 form.
From 1997 to 2001 special needs adoption qualified up to $ 6,000 adoption tax credits. From 1981 to 1996, tax cuts of $ 1,500 were only for the adoption of special needs.
Contracts with American documents released during the 1994 election campaign include the proposed Family Empowerment Act including the language of tax incentives for adoption. Democrat President Bill Clinton endorsed the idea of ​​an adoption tax credit in a letter to House Speaker Newt Gingrich stating that tax credits would reduce the cost of adoption for many families. The Small Business Employment Protection Act of 1996 made an adoption tax credit in the Internal Revenue Code with an initial $ 5000 tax credit limit ($ 6,000 for the adoption of special needs).
Maps Adoption tax credit
Tax Year for Credit Claims Adoption
Domestic adoption fees are claimed for tax credits in the following tax year when they are paid. Both domestic and foreign adoption fees claimed in the tax adoption year are final. Domestic adoption costs are allowed even when the adoption process is abandoned. The cost of adoption per child accumulates so that any cost taken for credit in the previous year is evaluated in determining whether a tax credit maximum has been obtained.
The tax credit rules are different for foreign adoption.
Qualified adoption fee
Under US tax law, eligible expenses include adoption fees, court fees, attorneys' fees, travel expenses (including the amount spent on meals and lodging away from home), and other costs directly related to and whose primary purpose is legal adoption of eligible children. The adoption tax credit is per child, so credit doubles when adopting two children in the same year. It is also important to note that this is a "credit", not a mere "reduction". Tax credits are dollars for federal dollar tax deductions, not deductions of taxable income, as with mortgage payments.
Adoption of Special Needs
Parents who adopt children with special needs can claim full credit without documenting fees. There are several factors that determine whether a child has "special needs" and these factors may vary by country.
A child with special needs has a factor or condition (uniquely defined by each Country) that may involve the following:
Ethnic or racial background    Age    Membership in your sibling group    Medical, physical, or emotional disabilities    Risk of physical, mental, or emotional disability based on family history of birth    Any condition that makes it more difficult to find a host family
This broader definition of "special needs" can be used to determine the eligibility for Federal financial assistance for adoption of children and adolescents from the US care system. While there is not a single Federal definition of special needs, according to the IV-E title of the Social Security Act, a child or adolescent with special needs must also meet the following two requirements in order to qualify for Federal adoption assistance:
1. Child or teenager can not or should not be returned to their parent's house (s).
2. Unsuccessful attempts to place children or teenagers without the aid of adoption (finances), except in cases where such placement would not be in the child's best interest or adolescence.
Parents need to document the child's special needs, and this documentation may include subsidized adoption/adoption agreements, letters from states/regions that approve the child for adoption adoption/subsidy subsidies, or a letter from a welfare state/welfare state child stating that the child have special needs. See Question 13 in the FAQ for information about the documentation.
Specific Legislation Tax Credit Requirement has been introduced many times in congresses to expand the special needs of adoption tax credits for adults and disabled people.
Documentation
You must keep all financial records, legal agreements, and written adoption documents, including home study documents. Financial records include invoices, bank statements, and copies of written checks. Most audits in case of adoption tax credits are done with correspondence so that in terms of audits, you and your accountant will usually communicate with IRS Internal Revenue Service by mail and fax. The tax audit can only take place during the last 3 tax years so you only need to keep records related to the adoption fee for 4 years.
International adoption requires additional documents and enrollment after the child is adopted abroad and resides in the United States (US). US numbers and social security cards, passports, birth certificates, and US surgery are additional documents that may be required for a child who is permanently resident in the United States. Readoption is a way of documenting parent-child relationships under US law.
The IRS may request a final adoption decision, placement agreement from an authorized agent, court documents and state determination that the child is a child with special needs.
IRS Supervision
For the 2012 tax reporting season, 90% of the adoption tax credit claims are subject to IRS reviews and 69% are audited. The Office of the Taxpayer Advocate cites this as a serious matter in the IRS. The average delay for this correspondence audit is 126 days. More than 55% of these correspondence audits are closed without change.
Benefit of Country Adoption Tax
Many states have adoption tax allowances that are in addition to federal tax credits. These tax benefits to citizens and claimed when they file a state tax refund:
Many of these countries limit the benefits to adoption of children in care within the state. In addition, some countries such as Florida give free lectures to public institutions in the state of adoption. In Florida, this applies to adoptions by family members of large children as well.
References
Source of the article : Wikipedia
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