[Individual]Adoption 1 -- Exclusion for Employer-Provided Adoption Benefits (Feb-19-2011, 59 days left)

You may exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses when the child is your eligible child. You should fill out Form 8839, then fill out Form 1040 line 7.

The maximum exclusion for employer-provided benefits have increased to 13,170/eligible child. If you have MAGI > 182,520, this amount begins to phase out and is completely phased out for MAGI > 222,520.

Both conditions are required:

Condition 1: your employer had a qualified adoption assistance program.

Condition 2: any of the following statement are true.

1. received adoption benefits in 2010, except for adoption of a foreign child.

2. adopt with special needs and adoption became finale in 2010.

3. adopt a foreign child: get benefit in 2010 and adoption became final in 2010 or before 2010.

Who is eligible child?

1. any child under age 18. If the child turned 18 during the year, you only consider the part of the year he/she was under age 18.

2. any disabled person physically or mentally unable to take care of himself or herself.

What's Employer-Provided Adoption Benefits?

It should be shown in W-2, Box 12 with code T. Your salary may have been reduced to pay this benefits, also may not show in box 12 but you still can exclude from your income, if all of following apply,

• Special needs
• Became final in 2010
• Existence of employer-qualified adoption assistance program

Who can take the credit and exclusion?

• Generally, if you are married, you must file a joint return to take the credit or exclusion. But we still have special rule for people file separately.
• MAGI less than 222,520 or you have a carryforward of adoption credit from a prior year

When to take the credit or exclusion?

You can began to get the credit or exclusion when child become a U.S. citizen or resident, even if the adoption never became final. If the child is a foreign child, you cannot take benefit until the adoption becomes final. So if you get early benefit, you cannot take it until the adoption became final.

PSQ

Source: http://www.irs.gov