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Adoption Credit CPA discusses IRS Form 8839 and NC D-400TC

Wilmington NC CPA firm comments on the IRS 2011 Adoption Credit

Want to talk proactively with a Wilmington NC CPA to help maximize the Adoption Credit? Call us for a free initial consult at 399-2705.

IRS Form 8839  was kept alive, extended and expanded through 2011, via a provision tucked into the Patient Protection and Affordable Care Act.  Tax credits offset your actual tax liability; a dollar of credit can be worth a dollar of tax savings.  Deductions just lower your taxable income and may only be worth 15 cents in tax savings.   And, new in 2011, the Adoption Credit can actually generate a tax refund if your tax liability falls below zero!  So the Adoption Credit is a nice tax and social incentive for parents when adopting, essentially offsetting some of the upfront costs.

“The Adoption Credit is now refundable: parents may get a tax refund if their tax liability i less than the credit amount.”
Gary Bode, CPA | Wilmington NC Tax Accountant

The provision raises the maximum credit amount by $1,000, for qualifying adoption expenses incurred after January 1, 2010, to a limit of $13,170.  When the adoption credit began 10 years ago, it was $5000 and non-refundable.  Other changes to the Adoption Credit include incentives for adopting children with special needs.

But IRS Form 8839 is only part of the good news for adopting parents.  NC also honors the Adoption Credit.  Through NC D-400TC.  But at half the IRS amount.  It is non- refundable: the NC Adoption Credit can only reduce you tax liability to zero, it cannot generate refund.  But any unused dollar amounts can be carried forward for five tax years.

Allowable adoption costs for calculating the credit include:

  • Adoption fees
  • Lawyer fees.
  • Court costs.
  • Travel expenses
  • Meal expenses etc.

Exceptions include:

  • Expenses to adopt your spouse’s child.
  • Expenses deductible elsewhere on the return.
  • Expenses paid by your employer.
  • Expenses paid by the government etc.

For non US citizen children, the credit doesn’t apply until the adoption is final. For married folks, a joint return should be filed. The credit is per child and allows for multiple children to be adopted.

Uncle Sam uses tax incentives to promote economic and social goals. I doubt parents would adopt solely for $13,170. But $13,170 is a nice incentive during a recession for kind hearted folks thinking about adoption. Talk to your Wilmington NC CPA proactively. Like most IRS issues, there are lots of details.

If you need a free initial consult on the Adoption Credit from a Wilmington NC CPA tax preparer, please call us at (910) 399-2705.

1 comment to Adoption Credit CPA discusses IRS Form 8839 and NC D-400TC

  • Angie Roberts

    We were gifted money from our church and another organization. We have seen in other adoption tax credit related information that amounts paid by your employer “or other organizations” would count as an exception. Both of these gifts were given to us in the form of a check we deposited into our personal checking account. Would these two donations apply to the exceptions and we should therefore subtract those amounts from our total adoption expenses? Or, are donations/gifts regarded differently and should not be subtracted from the total adoption expenses? Thanks for your help.

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