Your Tax Question - 064

Dear John, I have friends who adopted a child this year from Russia. Isn’t there a tax deduction for adoption? Thanks, Kelly
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Hi Kelly,

I would advise your friends to consult the agency that helped her arrange her adoption for specifics to their case. But to answer your question: Yes, there is a tax deduction for adopting.

Congress gives you a refundable $12,150 per adopted child tax credit. This means that should your tax liability be $5000 and you spent $12,150 in qualified expenses then the US Government will give you $7,150 back. But this is only the deal for this year and next year. Beginning in 2012, the credit reverts to just $5,000 and it is not refundable.

Thanks,
John

Your Tax Question - 045 (Part B)

(Continued from Your Tax Question - 045 (Part A))

I won't try to detail all of the items that are new in 2010 because of the Health care Act but I will point out some of the details that will affect most individual tax payers...

2010:

* Tanning Services Excise Tax - This is a 10% tax on all tanning services. As of July 1, 2010 owners of tanning service facilities are required to charge their customers a 10% sales tax on the tanning service and remit those monies quarterly to the IRS. If the business is a health facility that offers health and fitness services but allows its members to use tanning beds as part of the membership then there is no excise tax.

* Small Business Health Insurance Credit - For eligible small employers (ESE) who provide their employees with health insurance a credit may be available. An ESE must have no more than 25 full-time equivalent (FTE) employees [NOTE: A full-time employee is one who works 30 hrs a week for this credit] and an average of $50k per year annual salary per employee including the owner's wage. [Should this be called the Good Luck Small Business Health Insurance Credit?]

* Child Under 27 & Employer-Provider Health Insurance - It used to be that your children were allowed to be on your employer provided health insurance until they turned 24 so long as they were students in an accredited higher education program. Now, your child is allowed to be on your health insurance until the end of the year that they turn 27 years of age and they need only be your child - not even in school.

* Adoption Credit - Under the old law the maximum credit was $12,170 but under this plan the credit is increased by $1000 to $13,170.

While there are more changes to this and the details shared are more intensive than this I hope to have helped you see some of the changes that may effect you for this coming tax season. In Part C of this series I will share a little about the future proposed changes for 2011 and beyond.

John

Your Tax Question - 009

Dear John, My husband and I just adopted a baby girl from China and we have to get her a Social Security number, how do we do this? Thanks, Rita.
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Dear Rita,

I would have thought that the agency that managed your adoption process should have given you all this information (that’s my way of saying that I am not exactly sure). I know that you will need a number for her to claim her on your taxes but I am not positive if she will have a SSN or need a ATIN (Adoption Taxpayer Identification Number) during the process of getting her a SSN. However, try this link for more information - IRS website.

I hope this helps,
John

PS. If you and your husband need a tax preparer for the tax season - I know a guy. Email me