Carl and Jenny adopt a Korean orphan. The adoption takes 2 years and two trips to Korea and is finalized in 2022. They pay $8,000 in 2021 and $7,500 in 2022 for qualified adoption expenses. In 2022, Carl and Jenny have AGI of $150,000.
Carl and Jenny adopt a Korean orphan. The adoption takes 2 years and two trips to Korea and is finalized in 2022. They pay $8,000 in 2021 and $7,500 in 2022 for qualified adoption expenses. In 2022, Carl and Jenny have AGI of $150,000.
Chapter12: Tax Credits And Payments
Section: Chapter Questions
Problem 32P
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Carl and Jenny adopt a Korean orphan. The adoption takes 2 years and two trips to Korea and is finalized in 2022. They pay $8,000 in 2021 and $7,500 in 2022 for
qualified adoption expenses. In 2022, Carl and Jenny have AGI of $150,000.
If an amount is zero, enter "0".
If required, carry any division out to four decimal places and round final answers to the nearest dollar.
a. What is the adoption credit Carl and Jenny can claim in 2022?
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Taxpayers are allowed two tax breaks for adoption expenses. A tax credit is allowed for qualified adoption expenses paid by taxpayers, and an exclusion
from W-2 income is allowed for qualified adoption expenses paid by taxpayers' employers.
Form 8839 is used to calculate and report the adoption credit. There is a limitation on the total expense that can be taken as a credit with respect to an
adoption of a child. The credit is the total amount for each adoption and is not an annual amount.
The amount of the credit allowable for any tax year is reduced for taxpayers with AGI over $216,660 and is fully phased out when AGI reaches $263,410.
b. How much credit could they claim if the adoption falls through and is never finalized?
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c. How much credit could they claim if their AGI was $229,410?
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Step 1: Federal Adoption Tax Credit:
VIEWStep 2: (a) Determine adoption credit C and J can claim in 2022:
VIEWStep 3: (b) Determine credit could they claim if the adoption falls through and is never finalized:
VIEWStep 4: (c) Determine the credit could they claim if their AGI was $229,410:
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