March 21, 2010
How does the federal adoption tax credit work with international adoption?
Welcome back!
I know that we would need to spend the 11,000 or so in adoption expenses in order to get that matched in credit, but how does the tax credit actually work? If we fill out our taxes and we are getting a refund of say 0, do we get the credit on top of that or do we have to owe money in order to receive any of the credit?
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Comments on How does the federal adoption tax credit work with international adoption?
For international adoption, you can only take the adoption credit if the adoption was finalized in 2006.
The adoption credit is a non-refundable credit. This means the credit can reduce your tax liability down to $0. But if a tax payer don't owe any taxes, the adoption credit will not give the tax payer more money back. So if you are getting $500 refund because you overpay taxes, then you will get more money with adoption credit. If you are getting $500 because you are claiming Earned Income Credit, then adoption credit may not add to the amount of your refund.
See instruction for form 8839 http://www.irs.gov/instructions/i8839/ch01.html#d0e22
Best wishes.