Tulsa County Adoption Attorneys
Limiting Oklahoma Adoption Expenses with Tax Credits and Deductions
The attorneys at the Tulsa County Lawyers Group know that adoption places a significant financial burden on families. Many of our clients face adoption expenses well over $20,000, depending on a variety of circumstances, such as the birthmother’s circumstances, country fees, travel expenses, application fees, and medical expenses. Thankfully, tax credits and deductions can help offset the high costs of adoption. This article briefly covers some tax saving options for Oklahoma families that have adopted or are seeking to adopt. Of course, it is only intended as general information, as individual tax questions should be answered by professional legal and tax counsel based on your unique circumstances.
Federal Tax Credits For Adoption
The American Taxpayer Relief Act of 2012 permanently enacted a tax credit for “qualified adoption expenses” incurred to adopt a child under the age of 18, or an older individual physically or mentally incapable of caring for himself or herself. Qualified adoption expenses generally covered by the credit are items such as adoption fees, court costs, legal fees, travel expenses, lodging, and other similar expenses. Qualified adoption expenses do not include expenses to adopt the child of the taxpayer’s spouse. Since 2013, the non-refundable tax credit limit equals $12,970 per child. The credit is further subject to income limitations and dollar limitations based on modified adjusted gross income.
Note the 2013 tax credit is non-refundable. This means taxpayers receive a refund of federal income taxes, but only up to the amount of taxes otherwise due. A refundable credit is one that a person can receive regardless of their tax liability. The only years the credit was refundable were 2010 and 2011. Bills to amend the Internal Revenue Code to continue the refundable adoption tax credit are currently pending in the House and Senate. But these bills will not impact the 2013 tax year unless retro-active changes occur.
Generally, the credit is allowable whether the adoption is domestic or foreign. However, the tax years for which you can file for the credit vary based on this distinction. When you can claim the credit also depends on whether the adoption has been finalized and when expenses are paid. Credit may be allowable even if the adoption is never finalized, except in foreign adoptions. Additionally, there are special exceptions for credits in the case of an adoption of a U.S.-born special needs child. For purposes of the adoption credit, foreign children do not classify as special needs. Further, the definition of U.S. children with special needs is very narrow.
The IRS encourages taxpayers to e-file their Federal income tax returns. Starting in 2013, adoption credit forms are available to e-file. The adoption form is Form 8839, Qualified Adoption Expenses. The taxpayer should save significant documentation in support of the credit.
Oklahoma State Tax Deductions
In addition to the federal tax credit, many states have tax credits or deductions for families adopting children from their state. Oklahoma statute (Title 68 O.S. Section 2358) provides for deductions not to exceed $20,000.00 per calendar year for “nonrecurring adoption expenses paid by a resident individual taxpayer.”
Free Consultation Family Lawyers in Tulsa County
If you are planning to adopt or need additional advice on adoption tax credits available in Oklahoma, contact the experienced family law attorneys at Tulsa County Lawyers Group for a free consultation. Our accomplished and compassionate attorneys and staff will provide you with all of the knowledge you need to determine if adoption is the right step for your family. Call us today to schedule a free consultation. You may fill out our convenient online form, or you may call us at (918) 379-4864. Our staff can assist you in both English and Spanish.