Dollar Limits on Adoption Expenses
The dollar limits for both the exclusion of employer-paid adoption
expenses and the tax credit apply "per adoption effort." Therefore,
if your adoption spans two or more years, you can only claim total
credits of $13,190 over all the years that you paid expenses. Also,
you can only exclude $13,190 in employee benefits, if your employer
provides an adoption assistance plan.
If the child is a U.S.
citizen or resident, you can claim the tax benefits whether or not
your adoption effort is successful. However, if you attempt to adopt
one child and the adoption falls through, upon which you attempt to
adopt another child, the entire chain of events counts as one "adoption
effort." If you adopt two (or more) children, each child's adoption
would count as a separate adoption effort even if you adopt the children
at the same time (for example, if you adopt a sibling group).
Phaseout
of benefits at higher income levels. To determine whether
your income is high enough to cause you to lose some of the adoption
benefits, add up your adjusted gross income as shown on Line 37 of
Form 1040. Qualified adoption expenses can no longer be claimed on
Form 1040A. You must add to this amount the amount of any tax-free
adoption benefits you received from your employer, and also any foreign
earned income exclusion, foreign housing exclusion or deduction, or
excluded income from U.S. possessions.
If your AGI, as modified above, is $197,880 or less, you
qualify for the entire dollar amount of the credit and/or exclusion.
If your AGI is $237,880 or more in 2014, you won't qualify at all.
If your AGI is in between these amounts, your credit and exclusion
will both be reduced in proportion to how high your income is in relation
to the phaseout range. By working through IRS Form 8839, Qualified
Adoption Expenses, you can compute the limitation if one applies.
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Example If your 2014 modified AGI is $207,880,
the amount that exceeds $197,880 is $10,000. Since $10,000 is 1/4
of the phaseout range, you will lose 1/4 of the adoption credit and
also 1/4 of the exclusion, so the maximum benefit you could claim
for either the exclusion or credit for a non-special-needs child would
be $9892.50. If you were eligible for both the credit and exclusion,
you could claim a maximum of $19,785 in total benefits. |
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