What is the adoption tax credit?

The adoption tax credit is a federal income tax credit available to families who adopt a child. In the state of Florida, this credit is applied to reduce the amount of taxes a family owes to the federal government when they adopt a child. The credit is based on the qualifying expenses, such as adoption fees, court costs, legal fees, travel expenses, and other related costs. The credit amount for the 2020 tax year is up to $14,300 for each eligible adoption. Although this amount is higher than previous years, the tax credit is nonrefundable, meaning that the credit can only reduce the amount of taxes you owe to the federal government and not give you a refund. To qualify for the credit, both the adopting parent and the adopted child must meet certain requirements. The child must be younger than 18 at the time of adoption or must be a special needs child, and the adopting parent must be an American citizen or permanent resident. Additionally, the child must be legally adopted and not through a guardianship or a foster care arrangement. Finally, the adopting parent must keep accurate records of all expenses related to the adoption process in order to claim the adoption tax credit. These records should include adoption agency fees, court costs, and any other costs related to the adoption. The IRS also requires a final adoption document, such as a final adoption decree or an IRS Form 1023 application.

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