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“In the News: 2010 Adoption Tax Credit”

(Adoption Quarterly 2011 Spring Edition)

On September 29, 2010, the Internal Revenue Service issued guidance on the expanded adoption credit included in the Affordable Care Act (IR-2010-100). The IRS also released Form 8839 “Qualified Adoption Expenses” (QAE) that eligible taxpayers must use to claim the newly-expanded adoption credit on 2010 tax returns filed in 2011.

The Affordable Care Act raises the maximum adoption credit to $13,170 per child, up from $12,150 in 2009. It also makes the credit refundable, meaning that eligible taxpayers can get it even if they owe no tax for that year. In general, the credit is based on the reasonable and necessary expenses related to a legal adoption, including  adoption fees, court costs, attorney’s fees and travel expenses. Income limits and other special rules apply.

In addition to filling out Form 8839, Qualified Adoption Expenses, eligible taxpayers must include with their 2010 tax returns one or more adoption-related documents, detailed in the issued guidance.

The documentation requirements, designed to ensure that taxpayers properly claim the credit, mean that taxpayers claiming the credit will have to file paper tax returns. Normally, it takes 6-8 weeks to get a refund claimed on a complete and accurate paper return where all required documents are attached. The IRS encourages taxpayers to use direct deposit to speed their refund.

Taxpayers claiming the credit will still be able to use IRS Free File <http://www.irs.gov/efile/article/0,,id=118986,00.html>  to prepare their returns, but the returns must be printed out and sent to the IRS, along with all required documentation.

(Reprinted with permission. www.irs.gov/newsroom <http://www.irs.gov/newsroom> )

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