Top Ten Adoption Tax Credit Facts to Consider

Taxpayers who have adopted or tried to adopt a child in 2016 may qualify for a tax credit. Here are ten important things about the adoption credit:

The Credit. The credit is nonrefundable, which may reduce taxes owed to zero. If the credit exceeds the tax owed, there is no refund of the additional amount. In addition, if an employer helped pay for the adoption through a written qualified adoption assistance program, that amount may reduce any taxes owed.
Maximum Benefit. The maximum adoption tax credit and exclusion for 2016 is $13,460 per child.
Credit Carryover. If the credit exceeds the tax owed, taxpayers can carry any unused credit forward. For example, the unused credit in 2016 can reduce taxes for 2017. Use this method for up to five years or until the credit is fully used, whichever comes first.
Eligible Child. An eligible child is an individual under age 18 or a person who is physically or mentally unable to care for themselves.
Qualified Expenses. Adoption expenses must be reasonable, necessary and directly related to the adoption of the child. Types of expenses may include adoption fees, court costs, attorney fees and travel.
Domestic or Foreign Adoptions. Taxpayers can usually claim the credit whether the adoption is domestic or foreign. However, there are different rules regarding the timing of expenses for each type of adoption.
Special Needs Child. A special rule may apply if the adoption is of an eligible U.S. child with special needs. Under this special rule, taxpayers can claim the tax credit, even if qualified adoption expenses were not paid.
No Double Benefit. In some instances both the tax credit and the exclusion may be claimed but not for the same expenses.
Income Limits. The credit and exclusion are subject to income limitations. These may reduce or eliminate the claimable amount.
IRS Free File. Use IRS Free File to prepare and e-file federal tax returns for free. File Form 8839, Qualified Adoption Expenses, with Form 1040. Free File is only available on IRS.gov/freefile.

Additional IRS Resources:

Tax Topic 607 – Adoption Credit and Adoption Assistance Programs

No Author Biography has been linked to this Article.

Fourth Circuit: Brittner v. Beach Anesthesia

Edward C. Boltz

June 25, 2023

Summary: Brittner filed an adversary proceeding against Beach Anesthesia alleging violations of the automatic stay, but the bankruptcy court (affirmed by the district court) held that she had either failed to establish actual damages or to mitigate damages. The Court of Appeals held that that Brittner needed to satisfy a five-part test to establish a violation of the automatic stay: (1) that a bankruptcy...

Tenancy by the Entireties and the § 522(f) Calculation

James M. Davis

February 25, 2024

“Over the years courts have struggled to apply the lien-avoidance provisions under § 522(f) to jointly owned property. . . .Things get even more confusing when the debtor owns property as a tenancy by the entireties. That antiquated form of ownership has odd characteristics that do not fit well into the § 522(f) calculation.”

Members

The Dangers of Extending a Plan Too Long – Or Alternatively, Why Take as Little Time as Possible

April 26, 2020

By Joseph A. Bledsoe, III, Chapter 13 Standing Trustee for the Eastern District of North Carolina (New Bern) Under section 1113(b)(1)(C) of the CARES Act, upon the request of a debtor, and after notice and a hearing, a plan confirmed may be extended up to 7 years from the date the first payment under the original plan came due if...

Members

Sua Sponte Sanctions Held to Higher Standard

Cathy Moran

January 14, 2024

9th Cir. BAP erected high bar for sanctions. And, interestingly, at the heart of the BAP’s decision was the very fact that BAP decisions are not binding.

Members

Remember, Landlords Are Sacred Cows in Bankruptcy

June 27, 2021

By M. Jonathan Hayes, Resnik Hayes Moradi LLP (Los Angeles, CA) (Reprinted with permission. Originally published by the Los Angeles Daily Journal on May 20, 2021) We have been getting a lot of calls recently as you might expect from distressed small businesses. The “free” government money is starting to run out and panic is setting in. The potential client...

Members

From the Editor – Claims

October 20, 2019

By The Honorable William Houston Brown (Retired) Claim allowed after reopening of no-asset case. The Chapter 7 case filed as no-asset was reopened after discovery of assets for distribution, and debtors objected to a claim on basis of statute of limitations. Affirming, the Bankruptcy Appellate Panel held that the time to commence action on the claim had been tolled under...

Members

Five Things Trustees Should Know About the Small Business Reorganization Act of 2019

September 8, 2019

By Lawrence R. Ahern, III, Brown & Ahern (Nashville, TN) Introduction Four bankruptcy-related bills were enacted during the 116th Congress and signed into law on August 23, 2019.1 The legislation affected both business and consumer cases. One bill, the Small Business Reorganization Act of 2019 (SBRA),2 deals on its face with a non-consumer topic. However, it will be of great...

Members

Fond Farewell to Danny O’Brien

The Academy

September 25, 2022

Dear Danny, We know that you would not want a tribute – it’s simply not who you are. But we couldn’t let this moment pass without acknowledging how admired and respected you are. We will all miss you and are better for having known you. You are a stellar example of what all humanity should strive to be. As a...

Conflicting Interpretations: A Chapter 13 Trustee’s Compensation After Pre-Confirmation Dismissal or Conversion – Part 2 of 3

Brittani Bushman

February 6, 2022

(Used with expressed permission from the MI Bankruptcy Journal and the Steven W. Rhodes Consumer Bankruptcy Conference) III. Contrasting the Majority and Minority Interpretations The majority and minority approaches differ as to (1) the interpretation of the use of "collect" in § 586(e); (2) the operative effect of parallel provisions in chapters 11 and 12 on the interpretation of §...

Members

After Chicago v Fulton: Not Only Cars – A Survey of Fulton Rulings and a Weakened Automatic Stay

Hale Andrew Antico

December 11, 2022

Intro: What is a Fulton ruling? When Chicago v Fulton (In re Fulton), 141 S Ct. 585 (Sup Ct, 2021) was first decided by the Supreme Court, there was a consensus among bankruptcy attorneys that the erosion of the automatic stay with regard to turnover was only about cars. That is, Fulton was a narrow ruling that was only about...

Members