Remember to keep track of your adoption-related expenses. They can save you money on your income taxes.
A tax credit is a dollar-for-dollar reduction of the income tax you owe. For example, if you owe $1,000 in federal taxes but are eligible for a $1,000 tax credit, your net liability drops to zero.
Tax credits are more favorable than tax deductions because they reduce the tax due, not just the amount of taxable income.
2022 – For adoptions finalized in the calendar year 2022, the maximum credit allowed for qualified adoption expenses is $14,890. The credit available to a taxpayer who adopts a child with special needs is also $14,890 for 2022. The credit begins to phase out for taxpayers with modified adjusted gross income (MAGI) in excess of $223,410, and it’s completely phased out at $263,410 or more.
2023 – For adoptions finalized in 2023, the maximum credit will be $15,950, and the maximum credit will begin to be phased out when the adoptive parents’ Modified Adjusted Gross Income (MAGI) for 2023 is greater than $239,230, and they will not be entitled to any credit if their MAGI is equal to or greater than $279,230 for 2023.
Keep receipts for your expenses. The IRS has been known to require verification of expenses claimed as credits.
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Raleigh, NC 27612
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https://millsadoptionlaw.com/