How can the Adoption Tax Credit Benefit You?

While many hopeful parents have more than enough love to give an adopted child, oftentimes the financial costs can be the only thing holding them back from their dreams of a family. However, not having tens of thousands of dollars in savings certainly doesn't make someone less qualified to be a parent.

It's for reasons such as this that tax credits are available to parents with newly adopted children. This article seeks to demystify the 'adoption tax credit 2018' process, letting you know what it is, why you might be eligible, what you might expect to receive, as well as how to file your claim within your yearly taxes.

What is Adoption Tax Credit?

Offered by the state, adoption tax credit is a nonrefundable tax credit, offered to help encourage adoption. It aims to relieve the financial burden of specific adoption expenses, which are incurred by taxpayers. Factors which can be included in a claim are adoption fees, attorney fees, court costs, travel expenses (particularly useful if you have adopted internationally), as well as re-adoption expenses in regards to international adoptions.

Qualification Guidelines

The basic requirements for qualification for adoption tax credit are two-fold. If you have adopted a child other than a stepchild within the year of 2018 and the child is under 18 (or over 18 in regards to physical or mental handicaps that leave you as their primary caregiver) then it is likely you are eligible to make a claim.

Most types of adoption methods, such as both domestic and international are able to be claimed for with adoption tax credit. However, if you are fostering, then you will not qualify.

How much is Adoption Tax Credit 2018?

The maximum entitlement able to be achieved typically changes slightly from year to year, reflective of inflation. As of 2018, this maximum entitlement sits at $13,810. The amount you are awarded will depend on your income as well as your federal tax liability, that is to say the amount you're liable to pay in federal income taxes. The exception to this rule surrounds any child who has been deemed by the state as 'special needs', where usually the maximum amount will be given.

Typically, the higher your income, the less of a tax credit you'll receive. Those earning $207,140 – $247,140 for example, will only be eligible to a portion of the credit, and those earning any higher than this bracket will not be eligible.

Finally, if your adoption credit exceeds your liability, as it is nonrefundable, you'll need to carry over the difference to the next financial year.

Making a Claim

To claim adoption tax credit 2018, you'll need to complete an IRS 8839 form, making sure you have the correct form for the year in question. This form should then be submitted alongside your 1040 form, when filing your taxes. It's important, as with any document, you read the instructions thoroughly, to ensure you will receive the support you deserve.

Help Within your State

Finally, you may also qualify from further support from your specific state. There are additional tax credits in states such as Utah, North Carolina, Arizona, and California, for example. Remember to follow your states set guidelines however, and as with any kind of financial claim, its best to seek the advice of professionals, such as your adoption attorney or a tax preparer.