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| Adoption and Taxes Part IV |
| Monday, October 30, 2006 |
After two very longwinded discussions on the Adoption Tax Credit I'll finishing this little (did he say 'little'?) series mentioning a few more items adopting parents can use to lower their taxes. Actually all these listed here are available to all parents not just those adopting.
The first, which probably everyone knows about, are Exemptions. In 2006, this deduction (not a credit, see "Part II" for the difference) will reduce your taxable income by $3,300 for each exemption. As always there are limitations so read the instructions for form 1040 (or follow the instructions of your tax software).
Side note: I've used TurboTax for over 15 years, even with some fairly complicated tax returns, and I highly recommend you do your own taxes unless they are very very complicated or you are very very finance/math challenged. These computer programs are VERY easy to use and ask you questions in English, not IRSish.
The second benefit is the Child Tax Credit in which you can get up to a credit of $1,000 per child. As with all the others, there are limitations (mostly based on your AGI, actually it uses Modified AGI). If your MAGI is above $110,000 for 2005 (not sure if this changes in 2006) the credit begins phasing out. Get Publication 972 from the IRS to see all the details.
Important point #???, well number whatever: There's actually a way to get this credit even if you have $0 tax liability. Yep, you get money back EVEN IF you do not owe any tax. See Pub 972 for details
There is also a Credit for Child and Dependent Care Expenses. Basically you get a credit for some of the expenses for child care for your little one (or even big one, since it includes disabled adults as well). Get form 2441 and it's instructions from the IRS here for more details.
There are also some credits associated with education expenses but those really pertain to college and fortunately those of us adopting a toddler don't have to worry about that one for awhile (at least worry about the tax implications, you should, in my opinion, immediately start saving for your child's education the minute you bring them home. Perhaps I'll discuss why and how later. |
posted by Steveg @ 10:10 AM  |
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I'm Steve and this is my wife Stefanie. This is our story, mostly seen through my eyes, of the journey to create our family by adopting a child from Russia.
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