As the year comes to an end, it is time to look forward to next year. That also means preparing for tax time in Illinois. If you welcomed a new member in your family this year through adoption, you may see some benefits on your federal income taxes.
The IRS explains that you can get credit for some of the expenses you incurred as part of the adoption process. You may have been aware of this but if not, you need to make sure that you understand the credits and take them on your taxes.
Income and total limitations
As with any type of credit, the IRS does set limits for the credits you can claim for adoption expenses. The main limit is based on your income. The ability to take the credits phase out at certain income levels based on your modified adjusted gross income, so even if you do have a high income, you may still want to check into the credits since you may end up within the income guidelines.
Also, there are reductions for claiming adoption credits over multiple years for the same adoption. This may apply if your adoption spans two or more years and costs occur throughout the process that you can get credit for. It may lower the amount of the credit you can take each subsequent year.
You can get credit for many different expenses that occur during an adoption. Some are direct costs, such as adoption fees, court costs and attorney fees. You also can take credit for other expenses related to the adoption, such as travel expenses.
Since adoption can be an expensive process, it is always a blessing when you can find ways to reduce those costs. While your adoption may already be final, you may find you can get some tax relief in the new year. Please discuss these issues with your tax preparer.