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Family Tax Topics

Claiming Tax Credits for a New Baby or Adopted Child

Having or adopting a new child represents an enormous change in your life, but what does it mean for your taxes? 

The standard deduction 

The standard deduction, by filing status, is:

Status

Amount

Single

$12,400

Married Filing Jointly or Qualifying Widow(er)

$24,800

Married Filing Separately

$12,400 (may be $0 due to spouse filing status)

Head of Household

$18,650

Tip/Help

The Child Tax Credit is $2,000 per child with up to $1,400 per child potentially refundable.

Can I claim any credits or deductions for my adopted child?

Adoptive parents can still claim the Credit for Qualified Adoption Expenses, also known as the Adoption Credit, for all qualified adoption expenses paid. For the tax year, this nonrefundable credit is worth up to $14,300 and can be claimed for costs related to the adoption of an eligible child (under age 18 and not a spouse’s child). These expenses can include fees, court costs, legal fees, agency fees, travel expenses, and expenses required by the state as a condition of the adoption. Any unused portion of the credit can be carried over for five years. 

If the adopted child was born in the US or is a resident alien, you can claim the credit the year after you incurred the related expenses. But if the adoption is finalized the same year you began incurring related expenses, you can claim the Adoption Credit that year. If you incur adoption expenses in the year after the adoption is finalized, you can claim the credit for that year.

Even if the adoption is unsuccessful, you can still claim the credit. 

If you adopt a “special needs” child, such as a child from foster care, you may claim the full credit even if you did not spend any money for the adoption. A “special needs” child is not necessarily a child with medical issues; the term also covers family groups and others with special circumstances. State and local agencies determine who qualifies as a “special needs” child.

Can I claim the Earned Income Tax Credit (EITC) if I have, or adopted, a new child? 

A new child raises the amount of income you can earn and the amount of the EITC you may be eligible for. If you were previously ineligible for the EITC, having a child may allow you to claim it.

Tip/Help

If you’ve adopted a child, you might be able to claim the Adoption Credit, depending on when the adoption is finalized.

Can I claim a credit for daycare expenses?

If you’ve incurred childcare expenses, you can claim a portion of these by claiming the Child and Dependent Care Credit. The amount of expenses you can claim is based on the number of qualifying individuals who are receiving care. The allowable amount of expenses is up to $3,000 for one child and $6,000 for two or more children. If you are paying for care for two or more children, the $6,000 can be split in any way. For example, you have an 18-month-old and a 10-year old. You pay $8,000 a year for the 18-month old and $1,000 for the 10-year old, you can claim a credit on a total of $6,000 of the $9,000 you paid. This credit is even allowed when you have daycare expenses for older children (and other dependents) if the individual needs the care because they are unable to care for themselves.

The credit is a percentage of the allowed expenses and is based on adjusted gross income (AGI), the maximum credit is 35% of the expenses and the lowest credit is 20% of the expenses. This credit has no maximum income limit so taxpayers with higher incomes can claim the credit.

Questions

Who can claim the Child Tax Credit?
The child tax credit is $2,000 per eligible child, and may be claimed by taxpayers with under $200,000 AGI ($400,000 if married filing jointly).
Can I claim childcare expenses on my tax return?
Yes, you can claim a credit for your childcare expenses – the credit for Child and Dependent Care Expenses – though the amount of credit is based on your expenses and income.

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