Adoption Credit

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.

BREAKING DOWN '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. Expense

    1. The economic costs that a business incurs through its operations ...
  3. Earned Income Credit - EIC

    A tax credit in the United States which benefits certain taxpayers ...
  4. Exemption

    A deduction allowed by law to reduce the amount of income that ...
  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 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. Investing Basics

    Understanding How Oil Companies Pay Taxes

    Read about how big oil corporations pay taxes, and learn about tax exemptions and the option to defer. Discover the argument about big oil being given tax exemptions
  5. Taxes

    Tax-Saving Advice for IRA Holders

    Be informed about benefits and deductions that may apply to you and avoid costly mistakes on your return.
  6. Retirement

    4 Unusual Ways to Boost Social Security Benefits

    Working the system to get the highest legal Social Security benefits just got harder. Two long-time benefits strategies expired with the 2015 budget bill.
  7. Taxes

    New Retirement Plan Limits for 2016

    Here's what the limits look like for 2016, compared to 2015 (the taxes you'll file in April).
  8. Taxes

    How the New Tax Bill Affects Your Taxes

    Highlights of the new fiscal bill for individuals, business owners, investors. Note the December 31, 2015, deadline for Qualified Charitable Distributions.
  9. Taxes

    How To Deduct Your Job Search Expenses

    With approximately 12 million Americans out of a job right now, many people are spending significant dollars to be noticed by potential employers. Fortunately, some of these job-search costs ...
  10. Mutual Funds & ETFs

    A Complete Guide to Tax Loss Harvesting With ETFs

    Using exchange-traded funds (ETFs) to harvest tax losses can be a smart way to maximize your portfolio's tax efficiency.
RELATED FAQS
  1. Are personal loans tax deductible?

    Interest paid on personal loans is not tax deductible. If you take out a loan to buy a car for personal use or to cover other ... Read Full Answer >>
  2. Are tax shelters legal in Canada?

    Most tax shelters are legal in Canada. However, there have been illegal tax shelter scams that the Canada Revenue Agency ... Read Full Answer >>
  3. How much does a dependent reduce your taxes?

    Each qualified dependent that you claim on your federal income tax form can reduce your taxable income by $3,950, as of 2 ... Read Full Answer >>
  4. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at Bankrate.com, TaxACT.com and Moneychimp.com. Determining ... Read Full Answer >>
  5. Can I get a tax credit from conducting research and development?

    It is possible for a company to qualify for a research and development tax credit for conducting research and development. ... Read Full Answer >>
  6. 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 >>
Hot Definitions
  1. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  2. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  3. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  4. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  5. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  6. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
Trading Center