Question

Ann and Bill were on the list of a local adoption agency for several years seeking to adopt a child. Finally, in 2017, good news comes their way and an adoption seems imminent. They pay qualified adoption expenses of $3,900 in 2017 and $10,600 in 2018. The adoption becomes final in 2018. Ann and Bill always file a joint income tax return.

a. Determine the amount of the adoption expenses credit available to Ann and Bill if their combined annual income is $94,600.
$ 13810

In which year(s) will they benefit from the credit?
2018

b. If Ann and Bill's modified AGI in 2017 and 2018 is $232,200, calculate the amount of the adoption expenses credit.

In your computations, do not round any division and do not round other calculations. Round the final answer to the nearest dollar.

The credit is $______.

Answer 1

Answer:-

a) Income 94,600 and Addpotion expense of 3900 in 2017 and 10,600 in 2018

Total Adoption Expense = 3900+10,600 = 14,500

Maximum Allowed exemption was - $13,570 per child for 2017 and 2018 limit is 13,840

So he can claim 3900 in 2017 and balance i.e. 13,840-3900 in 2018 - 9940

b) AGI of 232,300.

In 2017 MAGI phaseout begins at $203,540 and ends at $243,540

In 2018 MAGI Phaseout begins at $207,580 and ends at $247,580

SInce AGI is above the limit by 28,760 in 2017 and 24,720 in 2018.. Exemption will phase out

Phase out in 2017 = 28,760/40000 = 71.9%

=3900 -(3900*71.9%)

= 1095.9

Phase out in 2018 = 24,720/40000 = 61.8%

= 9940 - (9940*61.8%)

= 3,797.08