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What Is The Largest Refundable Tax Credit? Adoption

Over the past year or so this blog has written about a number of adoption stories. We have noted so many of the wonderful benefits that come from adoptions. Now, here is one more.

As the tax filing deadline arrives, it might be worth noting that if you adopted a child in 2011, you may be eligible for a pretty hefty credit from Uncle Sam, reports the IRS website.

In fact, the adoption tax credit, at up to $13,360, is the largest refundable tax credit available to individual taxpayers. The Affordable Care Act helped to increase the amount of the credit and made it refundable.

In order, to claim this credit, here are the steps you must follow:

  • Fill out and return Form 8839, entitled Qualified Adoption Expenses.
  • Include with your return one or more adoption-related documents. The nature of the documentation will depend on whether it is a foreign or domestic adoption, and includes other considerations such as whether the child has special needs.
  • File via mail and not e-file (because of the documentation that must be attached).

To be more specific regarding the documents that you need, these include a final adoption decree, a placement agreement from an authorized agency, court documents, and the state's determination for special needs children.

As for the kind of expenses that qualify as adoption expenses, these include those that are reasonable and necessary and directly related to the legal adoption. One additional thing to keep in mind is that the adopted child must be under 18-years-old.

Also, it is worth noting that if your adjusted gross income is more than $182,520, your credit may be reduce. Finally, you absolutely cannot take the credit if your income is at $222,520 or above.

Of course, many of these requirements change over time, so you may want to check with an accountant or an attorney specializing in adoption.

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