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Hello!
My husband and I are going to adopt internationally, but I had a question about the tax credit. We currently have two biological children and were wondering, If you get the 10,000 adoption tax credit, do you still get your child tax credits and earned income credits as well? Like if I normally get back 3000.00 would I get that on top of the 10,000? Or do they take that away from you? When you get grants do they subtract them out of your tax credit? For example.......if I get a 4000.00 grant would the governement only give me a 6000.00 tax credit? We are still in the planning process and are trying to figure out our costs.......any advice would be greatly appreciated. Thanks!
-Mitsu
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Tax credits in any given year can only be up to the amount that you owe in taxes. If, added all together, all the credits are more than what you owe, you won't get anything back. I.e, if you owe $5000 in taxes, but your credits add up to $15,000, you don't get $10000 from the government. But you would get the entire $5000 as a refund if you had actually paid that in throughout the year.
The adoption credit can be held over for up to 5 more years. So, if you can't use the entire credit this year, you can use some next year, the following year, and so on until you actually get the $10,000 back.
More info is at [url]http://www.irs.gov/publications/p968/ar01.html#d0e133[/url]
I strongly recommend the use of tax prep software to help with these things. The software can automatically track whether you get to hold it over and for how many years.
AnnMarie
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And about the grant money - you can only claim the adoption expenses that YOU paid for. So if $10,000 total was paid for the adoptions - $6,000 of it was your money and $4,000 of it was grant money, then yes you can only request $6,000 back from the tax credit.
However, if total expenses came to $14,000 or more, then the $4,000 grant money paid some of the expenses and you still paid $10,000 out of pocket, so you can request $10,000 back from the tax credit.
Just what factors does she think it depends on?
Whatever amount the IRS would normally have of your money on April 15th is the amount that it is "possible" to get back because of a tax credit. If the IRS has $5,000 of your dollars and you are eligible to file for a tax credit of $5,000 or more, then you'll get all $5,000 back.
The only reason I can think of that you wouldn't get it all back is if you spent less than $5,000 on your adoption - in that case, of course, you can only request the amount that you spent. If you spent $4,000, then you'll only get $4,000 back.