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Wilmington CPA discusses NC Form D-400TC and IRS Form 8839 | Adoption Credit Tax Strategy

Wilmington NC CPA tax accountant discusses Form 8839 and NC D-400TC

Gary Bode, CPA: for most adopting parents, financial planning must include the IRS and NC Adoption Credit. If you'd like a free initial consult with an empathetic and proactive tax accountant, please call us at 399-2705.

Adoptive parents should be familiar with IRS Form 8839 and NC D-400TC because the IRS and NC Adoption Credits are calculated and filed on these tax forms.  Of course, the underlying adoption expenses are generally greater than the tax savings, but the Adoption Credit is a nice social and tax incentive.  Many parents could not afford to adopt without the Adoption Credit and must incorporate it into their overall financial strategy.

“Starting in 2010, a dollar of IRS Adoption Credit, on Form 8839, is actually worth one dollar, since it is a refundable tax credit. Previously it was non refundable and could not generate a tax refund if your tax liability fell below zero.” 
Gary Bode, CPA – Wilmington NC tax accountant

The combined IRS and NC Adoption Credits offer a potential tax liability savings of $19,755 up to $13,170 per child adopted on Form 8839. NC matches 50% of the Federal amount on D-400TC so up to $6,585 per child. But the NC Adoption Credit is non-refundable and limited to your actual tax liability for the year. Unused portions can be carried forward to five future tax years. So NC allows their entire credit, but it can be delayed into the future, an important point for planning.

Financial Strategy

The arbitrary nature of a calendar tax year and, the uncertain timing inherent in adoption makes planning crucial. There are ways to deal with this, especially if your child is a U.S. citizen.  You can forego paying estimated taxes, or, have your employer stop taking out withholding taxes from your paycheck.  This can free up cash flow to help with ongoing adoption expenses.  But generally, overall good budgeting and a knowledgeable tax strategy are required.  Fortunately most adoption expenses qualify for the Adoption Credit.  But there are exceptions and parents should be aware of these.  Sometimes a consult with a proactive CPA tax accountant is prudent.

We’re a Wilmington NC CPA firm, but serve a broader geographical base. And we offer expertise on all child related tax credits, like the Additional Child Tax Credit claimed on IRS Form 8812, for example.  If you’d like an initial free consult with a Wilmington tax accountant, please give us a call at (910) 399-2705.

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