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Hello -
I know there are many posts & replies to tax credit questions, but trying to weed through everything to see if it might apply to our situation isn't always easy. So I thought it'd be best to just ask directly about what applies to us.
My husband & I have a homestudy expense from 2010. In 2011, we have legal, agency & e-mom expenses from 2 failed adoptions plus a renewal expense for our homestudy.
When do we apply for tax credit on these expenses?
Can we apply for both the 2010 & 2011 expenses when we file our 2011 taxes this year?
OR do we have to wait until 2013 when we file taxes for 2012?
OR do we have to wait until we have a finalized adoption, whenever that may be?
Am I correct in stating that whatever we file on failed adoptions will reduce any credit available whenever we finally have a successful adoption?
If that is so, is it better to file for the failed expenses now or wait and file everything when we have a successful adoption?
Many thanks for your time!
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The IRS states that you may claim the federal adoption tax credit in EITHER -
1 - The tax year in which the adoption becomes final
-OR-
2 - The tax year after the expense was paid.
Whichever comes first.
So, your 2010 expenses will be claimed on your 2011 taxes.
Your 2011 expenses will be claimed on your 2012 taxes.
And so on - until the year in which you finally finalize an adoption, when you will claim the expense for the prior year AND the current year, and be finished.
And yes, if you spend say $5,000 on an failed adoption and claim it on your taxes, then the amount you can claim later is reduced by that $5,000. But you've gotten that money back already, so it's all good. You still get the whole credit, just divided into multiple years. You don't lose any of it by filing over multiple years as you spend the expenses.
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Thank you DianeS.
That's what I was thinking, but was afraid I could be wrong. To me, it just doesn't make sense to claim expenses an entire year later and not even in the year they occurred.
We lost so much money on 2 situations in 2011 that now our adoption budget for 2012 is smaller & that we feel it narrows our windows of opportunity for this year. We were really hoping I was wrong with how I was interperting the tax law, but obviously not.
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Just be prepared to send in your homestudy and itemized receipts/cancelled checks. That is what we had to do to get our refund from failed adoption expenses.
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Also keep in mind that you can only claim one adoption tax credit even though you had two failed situations. That is unless you are trying to adoption two children.
You are better off claiming them as soon as possible since the credit will be reduced in future years unless Congress acts on it. DianeS already gave you the timeline that you can claim them.
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We're in a different boat. We had a failed adoption of a 9 year old (special needs). My question is even though we paid no expenses since it was a state adoption, do we still qualify for the tax credit. It's all so confusing!!!
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levelred
We're in a different boat. We had a failed adoption of a 9 year old (special needs). My question is even though we paid no expenses since it was a state adoption, do we still qualify for the tax credit. It's all so confusing!!!
If a taxpayer completes the adoption of a special needs child from USA's foster care system, that taxpayer is usually eligable to claim the entire federal adoption tax credit, regardless of the expenses they paid. But it's important to note that it requires the adoption to be COMPLETED before they can claim that entire amount.
If you had any expenses at all for a non-completed adoption, for any child who is a citizen of the USA, then you qualify to recoup at least some of those expenses when doing your tax return for the tax year AFTER you paid the expense. (For instance, if you had to pay for your own CPR classes or fingerprint cards, you can claim that expense). If the expenses were paid in 2010, you claim them on your 2011 taxes.
But if you have paid literally nothing, then you have nothing to claim - at least until you have finalized the adoption of a special needs child.
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