The Health Care Legislation is enough to boggle the mind…However, here is a bit of good news for those of us that are adoptive parents. For 2010, adoptive parents may qualify to claim credit against their federal taxes up to $13,170 for “qualified adoption expenses” for each adopted child. Not only did they increase the amount, they also made it refundable! Previously the credit was non-refundable so parent could only use the credit to reduce their federal tax to zero and then carry over the balance for up to 5 years.
So, if your family has already adopted like ours and you have credit carry overs you will be able to use the credits on your 2010 federal taxes to reduce them to zero and any remaining credit will be refundable. I will use our family as an example, we adopted our first child in 2006 and our second in 2008. We qualified for the full tax credit for both. As of 2009 we were using up the last of our tax credits from our first adoption and using tax credits from our second adoption for any federal taxes owed. The difference when we file our 2010 taxes is once we have used adoption credits to reduce our taxes owed on federal to zero any remaining credit will be coming back to us in a refund.
This is great news for families that have already adopted that have been carrying a credit and for families adopting in 2010 or 2011 will also benefit from the refundable provision. So, if you have adopted and have unused credits or are in the process of adopting please talk to your tax adviser to see how this new provision will effect you. You may also contact us at knollcpa.com
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