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Crystal S. Stump, Esquire

www.wvadoptionlawyer.com
cstump@wvadoptionlawyer.com

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ADOPTION TAX CREDIT

Federal Tax Credit

   You may be eligible for a significant federal tax credit from the IRS! The IRS offers a tax credit (a dollar for dollar tax reduction in your overall tax liability) to adoptive families with adjusted gross incomes under a certain level to reimburse them for adoption expenses. 

   For 2011, the maximum adoption tax credit was $13,360.00. Adoptive families with an AGI in this taxable year of up to $185,210 are eligible for the full tax credit. The tax credit phases out for families with AGIs exceeding $225,210.  These numbers will change every year. The adoption credit is calculated on Form 8839 for the IRS.  The adoption tax credit is scheduled to sunset after 2012.    

   There is a special rule for those families adopting a special needs child (as determined by federal law and WV DHHR) - those families may quality for the full tax credit regardless of whether they have incurred any adoption-related expenses.   Beginning in the year 2013, the dollar amount of the tax credit will decrease to $5,000 or $6,000 for a special needs child.    

   For domestic adoptions, the credit may be available for each effort to adopt an eligible child, even if the adoption is not completed.  The tax credit is not available for step-parent adoptions.


IRS information on the adoption tax credit:
 
Tax Topic 607

IRS Form 8839

Revenue Procedure 2005-31, 2005-26 I.R.B. 74 - Rules relating to when a foreign adoption becomes final for purposes of taking the tax credit.


Other information on the adoption tax credit:

The federal adoption tax credit is not available for step-parent adoptions. 

Some employers offer adoption benefit plans which may include reimbursement.  This reimbursement may be taxable.    Please check with your employer.


West Virginia non-family adoption tax credit:

Please consult with your agency and the West Virginia tax department to see if you are eligible for this $2,000.00 tax credit. 

WV Tax Credit Schedule - Form WV/NFA-1


Military Adoption Reimbursement

Public law 102-190 which was effective in December 1991, established a permanent adoption reimbursement program for active duty members of the military services.  Up to $2,000 per child (or up to $5,000 per year) for qualifying expenses is available to military families whose adoptions were arranged by a qualified adoption agency.  http://www.nmfa.org/site/DocServer/DoD_Adoption_Reimbursement_7-06.pdf?docID=6722  is the link to NMFA site papers on this reimbursement. 




Note: In addition to the disclosure set forth below, be advised, this is not a substitute for professional financial advice and should not be relied upon without consulting with your tax adviser. Ms. Stump is not a tax attorney nor an accountant. You may not rely upon this information.