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Adoption tax credit questions

Hello,  I’m a little confused by the adoption tax credit.  Can you claim expenses for a year before adoption is finalized?  I read that you can claim expenses in the year after the expenses incur, even if an adoption didnt happen yet (like homestufy fees, attorney fees, etc).  It would just reduce the the total credit amount available. Here is the website I read it on so you can understand what I mean

If that is an option,  do you recommend doing that or just taking the credit all at once?

Another question is should I claim a higher number on my tax withholdings,  so that we owe more at tax time, for the credit to be applied towards?  If we withhold too much from paychecks I’m afraid we wouldnt have enough tax liability to apply the credit towards.


First, I recommend either working with a tax professional or getting TurboTax to file your taxes with the tax credit. TurboTax does a great job.

Second, yes, you can take some deductions before finalizing an adoption, but it might be easier to take it all at once.

Third, you can spread your deduction over five years (if I remember correctly), so you don’t have to owe as much as the credit is worth in the year you take it.

Fourth, you owe a certain amount of tax regardless of your withholdings, so claiming a higher number doesn’t change what you are able to claim on the tax credit in a given year. Example: say your AGI is $50,000 and you pay a 15% tax rate — you will pay $7,500 that year. You should be claiming enough withholding to pay the $7,500 from your paychecks, so you break even at the end of the year. Most people claim more than they need to, so they get a refund — say you actually paid $10,000, so you get a $2,500 refund that year.

Okay, so let’s say you increase your withholding that year and they take $12,000 out of your check. You will still owe only $7,500, and that will be applied to your tax credit, so if the credit total is $13,000, you’ll still be able to claim $5,500 of it the following year. You will get back all $12,000 that was taken from your check, but that is because you overpaid. And why overpay? You are just giving the federal government a free loan.

Better to reduce your withholding and have less money pulled from you check each month. You will get a smaller refund when you file, but you will have the money in hand all year instead. And when you have a new little one who needs furniture, car seats, bottles, formula, diapers, etc., you need that money!

Posted by readermom on Dec 31, 2017 at 1:38pm

Thanks for your help.  So lets say I have expenses in 2017 and 2018 and dont adopt until 2019.  If I wait til 2019 to apply the credit, can I use those expenses from previous years in the total?  I didnt know if you can postpone claiming the expenses like that.

When you said I. can spread the deduction over 5 years,  do you mean that If I dont have enough liability to apply the credit to in the year of adoption,  I can apply the excess credit in future years?

Posted by Emiluke on Jan 01, 2018 at 1:33pm

Did anything change in the new tax law?

Posted by Regina on Jan 10, 2018 at 6:57pm

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