Q: How can you use the income exclusion provision of the adoption tax credit to your advantage?
A: According to Becky Wilmoth, if your employer has a written qualified adoption benefit program you can exclude income from being taxable up to the maximum amount of the credit. Whether it is reimbursement or income exclusion, it can be for the maximum amount of the credit. The income exclusion or employer reimbursement cannot be used for the same expenses as used for the Adoption Tax Credit. For the credit and income exclusion you will use the same Form 8839.
Becky Wilmoth is an Adoption Tax Credit Specialist at Bills Tax Service. For more information on this topic, listen to the Creating a Family radio show: Adoption Tax Credit 2016 and visit our blog: Annual Adoption Tax Credit 2016 Show.Image credit: Philip Taylor PT