Adoption Tax Credit
Posted: Tue May 22, 2012 2:35 pm
This one is a potential two-way benefit.
and in addition two classes of children may apply.
IRC sec. 36C provides an adoption expense tax credit which is refundable (meaning that even if the taxpayer had zero earnings, they will write him/her a tax refund check to cover the expense.
IRC sec 137 enables exclusion of any employer provided adoption benefits. So if the employer pays it, it is simply excluded from the employee's paycheck and not includable in income.
You can have EITHER BUT NOT BOTH.
Next decision tree: who is adopted?
1. Qualifying child:
(a) Under 18
(b) physically or mentally incapable of caring for themselves
2. Special Needs child
(a) U.S. Citizen
(b) state determines that child cannot or should not be returned to the parents home ,,, and unless adoption assistance is provided to the adoptive parents, child will probably not be adopted due to a specific factor or condition.
Factors/conditions include ethnic background, age membership in a mionority or sibling group, physical or mental or emotional handicap.
So, the standards for an American Child are less severe and slightly balanced. Foreign child requires complete incapability.
Once you determine that the child qualifies,
Then, a credit under sec. 36C should be an asset (a govt check that hasn't been written yet), while an exclusion under 137 will be ignored if already paid, or an asset coming if the employer adoption "benefit" check is on its way or has been approved, etc.
Curt Harrington
curt @ patentax . com
www.patentax.com
The post was migrated from Yahoo.