Adoption Tax Credit 2016

‘Tis the season for taxes and that means it is time for the annual Creating a Family Adoption Tax Credit show. Although we call it the adoption tax credit for 2016, in fact it is the credit you will use on your 2015 taxes that are filed in 2016.

Our guest experts were Becky Wilmoth, an Enrolled Agent and Adoption Tax Credit Specialist at Bills Tax Service, and a frequent speaker on this topic. We also have Josh Kroll, Adoption Tax Credit and Adoption Subsidy Coordinator at the North American Council on Adoptable Children (NACAC). They were absolutely terrific. We covered the following topics.

Adoption Tax Credit 2016 to Use on Your 2015 Taxes

  • What’s the maximum tax credit this year?
  • What are eligible adoption expenses that can be included1?
  • Are Expectant Mother expenses (sometimes referred to as birth mother expenses) eligible to be covered by the Adoption Tax Credit?
  • When can you claim your adoption expenses for the Adoption Tax Credit? For domestic infant adoption? For foster care adoption? For international adoption?
  • Is the adoption tax credit refundable for foster care adoptions?
  • Does the adoption tax credit treat foster care adoptions differently than domestic private infant adoptions?
  • Do you get more tax credit when adopting children with special needs?
  • Who determines if a child has special needs for purposes of the Adoption Tax Credit?
  • Is your child considered “special needs” if they are covered under Medicaid as part of their adoption subsidy agreement, but do not get a cash subsidy?
  • Can you lower your tax withholdings to have a greater tax liability in order to take better advantage of the Adoption Tax Credit?
  • What are your options if you do not have enough tax liability to take full advantage of the Adoption Tax Credit?
  • Will the Adoption Tax Credit offset self-employment tax or will it only offset income tax liability?
  • Can self-employed people use the Adoption Tax Credit?
  • How to apply for the adoption tax credit using Turbo Tax when trying to claim the full credit when adopting a child with special needs from foster care?
  • “We are in a lengthy international adoption process, and the expenses will span several years before the adoption is finalized. 1) Does the adoption have to be finalized before we can claim the tax credit? 2) Will we still be able to claim the credit for the total amount we have spent on the adoption, or only the amount that we spent during the year for which we are filing?”
  • “Would I qualify for the text credit for adoption which I adopted in 2010 but got separated and now divorced? Was I too late to see if I qualify for the adoption Tax foster care for a special needs
  • Does the child have to live with you for at least 6 months before you can claim the credit?
  • “Is it true that if you have adopted before and you’re claiming a second adoption credit or deduction, you will most likely get audited?”
  • Is the adoption tax credit likely to trigger an audit?
  • In an international adoption, if the adoption is finalized in country but that child is not permitted to exit the country, as is the situation currently in regards to hundreds of Congolese adoptions, can parent claim the adoption tax credit?
  • How do you use the adoption tax credit after a failed adoption?
  • Is it possible to file married but separately and still have one parent use the adoption credit?
  • How to use the income exclusion provision?
  • Is the adoption tax credit applicable to embryo donation (sometimes known as embryo adoption)?
  • Is the adoption tax credit applicable to second parent adoptions of same sex couples?
  • Is the adoption tax credit applicable to unmarried heterosexual couples adopting their partner’s child?
  • How do you file for the adoption tax credit if you don not have a social security number or Adoption Taxpayer Identification Number (ATIN) for your child?

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Image credit: Alba Estévez G.