Adoption Credit

AAA

DEFINITION of 'Adoption Credit'

A federal tax credit that may be claimed by federal taxpayers who incur qualifying expenses, such as adoption fees, court costs, attorney fees and travel expenses, to adopt an eligible child. To claim the credit, the taxpayer must submit adoption documents and form 8839, Qualified Adoption Expenses, along with his or her federal tax return. Form 8839 is used to calculate the amount of the credit and also asks for the child's first and last name, birth year, whether the child has special needs, whether the child is foreign born and if the child is disabled.

INVESTOPEDIA EXPLAINS 'Adoption Credit'

In some years, the tax credit has been refundable, meaning that it could be claimed even if the credit exceeded the taxpayer's tax liability. In other years, the tax credit has been nonrefundable. If the taxpayer's employer also provides adoption assistance payments, these will reduce the amount of the credit.

RELATED TERMS
  1. Child Tax Credit

    A credit given to taxpayers for each dependent child that is ...
  2. Earned Income Credit - EIC

    A tax credit in the United States which benefits certain taxpayers ...
  3. Qualified Adoption Expenses - QAE

    The necessary costs paid to adopt a child younger than 18 years ...
  4. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
  5. Education IRA

    A savings plan for higher education. Parents and guardians are ...
  6. Exempt Income

    Certain types or amounts of income not subject to federal income ...
RELATED FAQS
  1. What is the difference between MAGI (modified adjusted gross income) and adjusted ...

    Calculating personal income tax correctly involves understanding two important tax terms: adjusted gross income (AGI) and ... Read Full Answer >>
  2. What is the difference between a regressive tax versus a progressive tax?

    A progressive tax is one that increases along with an individual's ability to pay the tax, while a regressive tax doesn't ... Read Full Answer >>
  3. What are some ways to minimize tax liability?

    Minimizing tax liability is one of the most important financial planning aspects for business owners and individuals each ... Read Full Answer >>
  4. What deductions, credits and exemptions depend on gross income calculations?

    The greatest challenge in determining your total tax liability stems from an incomplete understanding of what income figure ... Read Full Answer >>
  5. What is the difference between gross income and earned income?

    Prior to preparing and filing a tax return, do yourself a favor by gaining an understanding of commonly used tax terms including ... Read Full Answer >>
  6. Are Roth IRAs tax deductible?

    Contributions made to a Roth IRA are not tax deductible, although you may be able to take a tax credit, depending on your ... Read Full Answer >>
Related Articles
  1. Taxes

    Changes In Tax Legislation And Regulation

    Keeping on top of these amendments can help you avoid penalties and take advantage of benefits.
  2. Taxes

    How To Save More For Your Retirement

    The Economic Growth and Tax Relief Reconciliation Act of 2001 made it easier to prepare for the future. Will you be ready?
  3. Taxes

    Give Your Taxes Some Credit

    A few tax credits can greatly increase the amount of money you get back on your return.
  4. Taxes

    What is Adjusted Gross Income?

    Adjusted gross income (AGI) is a term from the Internal Revenue Code. AGI is used to determine a person’s income taxes due.
  5. Taxes

    The First Thing You Should Do With Your Tax Refund

    Nobody likes to pay taxes, but everyone loves to get a tax refund. When the check arrives in the mail, it's hard to resist spending it on some indulgence.
  6. Taxes

    Which Is Better? Tax Preparer Or Tax Software

    Every taxpayer – and every year – is different, so here are four factors to help you decide whether a tax pro or software is best for you.
  7. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.
  8. Economics

    What's a Subsidy?

    A subsidy is a benefit given to an individual, business or institution, typically by the government. Subsidies are given to promote a social good or an economic policy. The government usually ...
  9. Economics

    EU Probes Tax Laws To Catch Corporate Cheaters

    Recently, the EU has launched an investigation into tax deals between Amazon and the country of Luxembourg.
  10. Taxes

    7 Ways To Minimize Your 2014 Taxes By December 31

    The year's not quite over yet. See whether taking any of these steps would leave you owing less in 2014 taxes, come April.

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center