Monday, January 24, 2011

Doing taxes


There are a lot of questions about the adoption tax credit laws and how to file. It has been easy for us to file for the last two years. I think there is only one year left for us. Fortuantely it has been extended. And I think that the limit is about $13,170 this year for 2010 taxes.

Here's the official IRS document that explains it:

http://www.irs. gov/pub/irs- drop/n-10- 66.pdf

A section to note for carry over credits is on page 3 at the bottom - section 3

1. Amounts Carried Over from Earlier Taxable Years to a Taxable Year Beginning in 2010
An amount of an adoption credit claimed in an earlier taxable year that a taxpayer carries forward to a taxable year beginning in 2010 is allowable as a refundable tax credit. An amount that a taxpayer carries forward to a taxable year beginning in 2010 is not subject to an income limitation in that taxable year.

The following examples illustrate these rules.
Example 1. (i) In 2008, Taxpayer pays $2,000 of QAE to adopt an eligible child who is a citizen of the United States. In 2009, Taxpayer pays an additional $8,000 of QAE and the adoption becomes final. The adoption credit for $10,000 of QAE is allowable in 2009.

(ii) Taxpayer's tax liability for taxable year 2009 is $6,000, and Taxpayer applies $6,000 of the $10,000 credit against Taxpayer's 2009 tax liability. Taxpayer carries forward $4,000 of the credit to 2010.
(iii) In 2010, Taxpayer's tax liability is $3,000. Taxpayer applies $3,000 of the $4,000 carried forward adoption credit against Taxpayer's 2010 tax liability. Taxpayer is entitled to a refund of the remaining credit.

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