Tax Tips

Have you expanded your family?

If you are thinking about, or have already adopted a child under the age of 18, there are deductions and credits available for the expenses you have incurred. In 2011, you may be entitled to a tax credit of up to $12,150.

Expenses that qualify for this credit include any reasonable and necessary adoption fees, court costs, attorney fees, travel expenses (including meals and lodging), and any other expenses you paid that were required by the state as a condition of the adoption.

Generally, the credit is allowed in the year the adoption becomes final. If you paid adoption expenses in 2010, and the adoption was not final until 2011, the credit will be allowed on your 2011 income tax return. If you adopt a special needs child from the U.S., you are eligible for the full $12,150 credit regardless of your actual expenses.

The credit will reduce your tax liability dollar for dollar. If you are unable to use the entire amount, the remainder can be carried over to claim for the next five years. Any carryover existing after the five-year period is lost.

Related IRS Publications: Form 8839