Question

Isra and Haider are married and file a joint return. Having no children of their own,

they adopted a three year old child. They incurred $18,500 in qualified adoption

expenses such as adoption fees, attorney fees and court costs. The $18,500 was furnished

to Isra under an adoption assistance program maintained by her employer. Assuming Isra and Haider's AGI for the current year amounts to $65,000 before considering adoption assistance.

Explain the tax treatment of both the adoption expenses and the amount received

from Isra’s employer. Be concise? Show and Explain

Answer 1

Tax benefit for adoption is inclusive of tax credit for qualified adoption, in order to recognize the full benefit of the credit, your total tax must be at least equal to your credit which shall be carried forward if in excess of tax liability. The limit is however $14,080 per child for the year 2019.

Here Isra and Haider are married and file a joint return. The $18,500 was furnished to Isra under an adoption assistance program maintained by her employer.

AGI before adjusting adoption assistance = $65,000 (given)

Employer's assistance = $18,500 (given)

Assuming you meet all other requirements,

Tax credit which can be claimed = $14080 since dollar limited credit.

In addition, Amount received from employer can be reduced from AGI upto = $14080 since dollar limited exclusion.