Adoption can create new families or expand existing ones. The expenses of adopting a child may also lower your federal tax. If you recently adopted or attempted to adopt a child, you may be eligible for a tax credit. You may also be eligible to exclude some of your income from tax. Here are ten things the IRS wants you to know about adoption tax benefits.

  1. The maximum adoption tax credit and exclusion for 2012 is $12,650 per eligible child.
  2. To be eligible, a child must generally be under 18 years old. There is an exception to this rule for children who are physically or mentally unable to care for themselves.
  3. For 2012, the tax credit is nonrefundable. This means that, while the credit may reduce your tax to zero, you cannot receive any additional amount in the form of a refund.
  4. If your credit exceeds your tax, you may be able to carry forward the unused credit. This means that if you have an unused credit amount in 2012, you can use it to reduce your taxes for 2013. You can carryover an unused credit for up to five years or until you fully use the credit, whichever comes first.
  5. Use Form 8839, Qualified Adoption Expenses, to claim the adoption credit and exclusion. Although you cannot file your tax return with Form 8839 electronically, the IRS encourages you to use e-file software to prepare your return. E-file makes tax preparation easier and accurate. You can then print and mail your paper federal tax return to the IRS.
  6. Adoption expenses must directly relate to the legal adoption of the child and they must be reasonable and necessary. Expenses that qualify include adoption fees, court costs, attorney fees and travel costs.
  7. If you adopted an eligible U.S. child with special needs and the adoption is final, a special rule applies. You may be able to take the tax credit even if you did not pay any qualified adoption expenses. See the instructions for Form 8839 for more information about this rule.
  8. If your employer has a written qualified adoption assistance program, you may be eligible to exclude some of your income from tax.
  9. Depending on the adoption's cost, you may be able to claim both the tax credit and the exclusion. However, you cannot claim both a credit and exclusion for the same expenses. This rule prevents you from claiming both tax benefits for the same expense.
  10. The credit and exclusion are subject to income limitations. The limits may reduce or eliminate the amount you can claim depending on your income.

For more information, visit the IRS.gov website to see the Adoption Benefits FAQ page. Also, check out Form 8839 and its instructions. Both are available at IRS.gov or you can order the form by calling 800-TAX-FORM (800-829-3676).

TaxACT includes step-by-step guidance through the adoption credit and exclusion through Form 8839. Start your return or order your software now.

Additional IRS Resources:

March 2015
S M T W T F S
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31

Upcoming Tax Dates

March 2All businesses
File information returns (for example, Forms 1099) for certain payments you made during 2014.

March 2Farmers & fishermen
File your 2014 income tax return (Form 1040) and pay any tax due - Details

March 2Payers of gambling winnings.
File Form 1096 along with Copy A of all the Forms W2G you issued for 2014. If you file Forms W2G electronically, your due date for filing them with the IRS will be extended to March 31. The due date for giving the recipient these forms remains February 2.

March 2 All employers
File Form W3, Transmittal of Wage and Tax Statements, along with Copy A of all the Forms W2 you issued for 2014. If you file Forms W2 electronically, your due date for filing them with the SSA will be extended to March 31. The due date for giving the recipient these forms remains February 2.

March 2 Large food and beverage establishment employers
File Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips. Use Form 8027T, Transmittal of Employer's Annual Information Return of Tip Income and Allocated Tips, to summarize and transmit Forms 8027 if you have more than one establishment. If you file Forms 8027 electronically, your due date for filing them with the IRS will be extended to March 31.

March 2 Wagering tax
File Form 730 and pay the tax on wagers accepted during January.

March 2 Heavy highway vehicle use tax
File Form 2290 and pay the tax for vehicles first used in January.

March 10 Employees who work for tips
If you received $20 or more in tips during February, report them to your employer - Details

March 11 Communications and air transportation taxes under the alternative method.
Deposit the tax included in amounts billed or tickets sold during the first 15 days of February.

March 13 Regular method taxes
Deposit the tax for the last 13 days of February.

March 16 Corporations
File a 2014 calendar year income tax return (Form 1120) and pay any tax due - Details

March 16 S Corporations
File a 2014 calendar year income tax return (Form 1120S) and pay any tax due - Details

March 16 S Corporation election
File Form 2553, Election by a Small Business Corporation, to elect to be treated as an S corporation beginning with calendar year 2015. If Form 2553 is filed late, S corporation treatment will begin with calendar year 2016.

March 16 Electing larger partnerships
Provide each partner with a copy of Schedule K1 (Form 1065B), Partner's Share of Income (Loss) From an Electing Large Partnership, or a substitute Schedule K1. This due date applies even if the partnership requests an extension of time to file the Form 1065B by filing Form 7004

March 16 Social security, Medicare, and withheld income tax
If the monthly deposit rule Page 6 Publication 509 (2015) applies, deposit the tax for payments in February.

March 16 Nonpayroll withholding
If the monthly deposit rule applies, deposit the tax for payments in February.

March 25 Communications and air transportation taxes under the alternative method.
Deposit the tax included in amounts billed or tickets sold during the last 14 days of February.

March 27 Regular method taxes
Deposit the tax for the first 15 days of March.

March 31 Electronic filing of Forms W2
File copies of all the Forms W2 you issued for 2014. This due date applies only if you electronically file.

March 31 Electronic filing of Forms W2G
File copies of all the Forms W2G you issued for 2014. This due date applies only if you electronically file.

March 31 Electronic filing of Forms 8027
File Forms 8027 for 2014. This due date applies only if you electronically file.

March 31 Wagering tax
File Form 730 and pay the tax on wagers accepted during February.

March 31 Heavy highway vehicle use tax
File Form 2290 and pay the tax for vehicles first used in February.

March 31 Electronic filing of Forms 1097, 1098, 1099, 3921, 3922, and W2G.
File Forms 1097, 1098, 1099, 3921, 3922, and W2G with the IRS. This due date applies only if you file electronically. Otherwise, see March 2. The due date for giving the recipient these forms generally remains February 2. View More Tax Dates