IRS Tax Tip: Massachusetts residents who adopt may benefit from this special tax credit

| Mar 27, 2021 | Adoption |

The adoption process in Massachusetts can be expensive. Fortunately, the adoption tax credit can help offset some those expenses. Taxpayers who adopted or started the adoption process in 2020 should review the rules for this credit.

Here are some facts to help people understand the credit and if they can claim it when filing their taxes:

  • The maximum adoption credit taxpayers can claim on their 2020 tax return is $14,300 per eligible child.
  • There are income limits that could affect the amount of the credit
  • Taxpayers should complete Form 8839, Qualified Adoption Expenses. They use this form to figure how much credit they can claim on their tax return.
  • An eligible child must be younger than 18. If the adopted person is older, they must be physically or mentally unable to take care of themselves.
  • This credit is non-refundable. This means the amount of the credit is limited to the taxpayer’s taxes due for 2020. Any credit leftover from their owed 2020 taxes can be carried forward for up to five years. 
  • Qualified expenses include:
    • Reasonable and necessary adoption fees.
    • Court costs and legal fees.
    • Adoption related travel expenses like meals and lodging.
  • Other expenses directly related to the legal adoption of an eligible child.
  • If the taxpayer and someone other than a spouse each paid qualified adoption expenses to adopt the same child, the $14,300 credit must be divided between the two of them.
  • Expenses may also qualify even if the taxpayer pays them before an eligible child is identified. For example, some future adoptive parents pay for a home study at the beginning of the adoption process. These parents can claim the fees as qualified adoption expenses.
  • Qualified adoption expenses don’t include costs paid by a taxpayer to adopt their spouse’s child.

If you are contemplating a step-parent adoption, contact the Law Offices of Renee Lazar by telephone 978-844-4095 to schedule a FREE one hour no obligation consultation to learn the procedural requirements to formalize an adoption.

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