Zuba & Associates, P.C.

Adoption in Illinois: what tax credits are available for parents?

Although there are many benefits to adoption, this year adoptive parents in Illinois could see a sizable tax credit in the form of a check from the IRS. Adoptive families may receive a credit of more than $13,000 as a result of the Affordable Care Act. If a family has successfully adopted within the past six years, the adoptive parents could potentially claim up to $13,360 for each child.

While that amount is only $190 more than the amount adoptive families could claim last year, the big change since 2010 is that the credit is now fully refundable in the form of a check. Before the passage of the Affordable Care Act, any eligible credits were used as way to offset tax liabilities and could be extended forward over the years. But the Affordable Care Act provides for the credit to be actually refunded when applicable.

These credits are limited to families who are making less than $185,210. Adoptive families earning a combined income more than $225,210 are unfortunately ineligible to claim the credit.

Those seeking to claim the credit may benefit from meticulous attention to expense documentation. The IRS website provides information about this tax credit for those who need it. Processing for this particular credit will take time because the IRS will likely verify all provided documentation. In other words, be prepared for the IRS to call asking additional questions or even to audit the tax return.

Considerable delays occurred last year in the processing of this credit due to the large number of audits from the IRS. However, with the amount of the refund, this adoption credit is well worth the time it takes to track expenses and prepare necessary paperwork. Also, 2011 may be the last year to claim this tax credit if Congress does not extend it for future returns. Right now, the likelihood of that extension is low.

To be sure, adoption can be a wonderfully fulfilling yet expensive process. Being able to claim a sizable tax credit can help offset some of the expenses adoptive parents in Illinois may face while gaining legal custody of a child.

Source: The Washington Times, "Tax refund from the IRS for adoptive families in 2012," Andrea Poe, April 2, 2012

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