EIC and Adoption Credit

May 7, 2003

I think from reading all the posts I figured out the adoption tax credit. So I pulled out this past years tax return (2002). We are adopting a baby this summer and wanted to see how the credit would affect us.

We paid $1,756 in federal taxes, and after the EIC we were owed a refund of $3,142.

Since we qualify for the EIC, what will happen with the adoption credit next year? We don't have a lot of adoption expenses since this is a family adoption, but we still have to pay an attorney and court costs and some living essentials for our b-mom.

Thanks in advance!

Janice

mamatokay

May 7, 2003

Janice,

I am a tax Preparer and the only advise I can give you is to have your W-4 (the paper you fill out for withholding with your employer) changed to have less taxes taken out. If you do not have a tax liability at the end of the year, and you also receive the EIC, then it will not do you any good to claim the credit. So the best thing to do is to change the W-4, have way less taken out of your pay check and receive it throughout the year. That way even if the EIC helps with part of your tax liability next year, you can claim part of the credit only if you have a liability.

Hope this helps explain it. I have always said that the govt. called both the EIC (earned income credit) and the Adoption Tax Credit the same thing, but you do not recieve them the same. With EIC, it is actually additional money the govt gives to you if you fall within the right income range of between $100-$37000, and have at least one qualifying child. The Adoption Credit is a deduction which you can take directly off your tax liability the same as the Child Tax Credit, it is not actual money given to you.

~Carol~