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Hrblockfreefile 3. Hrblockfreefile   Adjustments to Income Table of Contents Individual Retirement Arrangement (IRA) Contributions and DeductionsContributions to Kay Bailey Hutchison Spousal IRAs. Hrblockfreefile Deductible contribution. Hrblockfreefile Nondeductible contribution. Hrblockfreefile You may be able to subtract amounts from your total income (Form 1040, line 22 or Form 1040A, line 15) or total effectively connected income (Form 1040NR, line 23) to get your adjusted gross income (Form 1040, line 37; Form 1040A, line 21; or Form 1040NR, line 36). Hrblockfreefile Some adjustments to income follow. Hrblockfreefile Contributions to your individual retirement arrangement (IRA) (Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32), explained later in this publication. Hrblockfreefile Certain moving expenses (Form 1040, line 26; or Form 1040NR, line 26) if you changed job locations or started a new job in 2013. Hrblockfreefile See Publication 521, Moving Expenses, or see Form 3903, Moving Expenses, and its instructions. Hrblockfreefile Some health insurance costs (Form 1040, line 29 or Form 1040NR, line 29) if you were self-employed and had a net profit for the year, or if you received wages in 2013 from an S corporation in which you were a more-than-2% shareholder. Hrblockfreefile For more details, see Publication 535, Business Expenses. Hrblockfreefile Payments to your self-employed SEP, SIMPLE, or qualified plan (Form 1040, line 28 or Form 1040NR, line 28). Hrblockfreefile For more information, including limits on how much you can deduct, see Publication 560, Retirement Plans for Small Business. Hrblockfreefile Penalties paid on early withdrawal of savings (Form 1040, line 30 or Form 1040NR, line 30). Hrblockfreefile Form 1099-INT, Interest Income, or Form 1099-OID, Original Issue Discount, will show the amount of any penalty you were charged. Hrblockfreefile Alimony payments (Form 1040, line 31a). Hrblockfreefile For more information, see Publication 504, Divorced or Separated Individuals. Hrblockfreefile There are other items you can claim as adjustments to income. Hrblockfreefile These adjustments are discussed in your tax return instructions. Hrblockfreefile Individual Retirement Arrangement (IRA) Contributions and Deductions This section explains the tax treatment of amounts you pay into traditional IRAs. Hrblockfreefile A traditional IRA is any IRA that is not a Roth or SIMPLE IRA. Hrblockfreefile Roth and SIMPLE IRAs are defined earlier in the IRA discussion under Retirement Plan Distributions . Hrblockfreefile For more detailed information, see Publication 590. Hrblockfreefile Contributions. Hrblockfreefile   An IRA is a personal savings plan that offers you tax advantages to set aside money for your retirement. Hrblockfreefile Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until distributed. Hrblockfreefile    Although interest earned from your traditional IRA generally is not taxed in the year earned, it is not tax-exempt interest. Hrblockfreefile Do not report this interest on your tax return as tax-exempt interest. Hrblockfreefile General limit. Hrblockfreefile   The most that can be contributed for 2013 to your traditional IRA is the smaller of the following amounts. Hrblockfreefile Your taxable compensation for the year, or $5,500 ($6,500 if you were age 50 or older by the end of 2013). Hrblockfreefile Contributions to Kay Bailey Hutchison Spousal IRAs. Hrblockfreefile   In the case of a married couple filing a joint return for 2013, up to $5,500 ($6,500 for each spouse age 50 or older by the end of 2013) can be contributed to IRAs on behalf of each spouse, even if one spouse has little or no compensation. Hrblockfreefile For more information on the general limit and the Kay Bailey Hutchison Spousal IRA limit, see How Much Can Be Contributed? in Publication 590. Hrblockfreefile Deductible contribution. Hrblockfreefile   Generally, you can deduct the lesser of the contributions to your traditional IRA for the year or the general limit (or Kay Bailey Hutchison Spousal IRA limit, if applicable) just explained. Hrblockfreefile However, if you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, you may not be able to deduct all of the contributions. Hrblockfreefile Your deduction may be reduced or eliminated, depending on your filing status and the amount of your income. Hrblockfreefile For more information, see Limit if Covered by Employer Plan in Publication 590. Hrblockfreefile Nondeductible contribution. Hrblockfreefile   The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Hrblockfreefile You must file Form 8606, Nondeductible IRAs, to report nondeductible contributions even if you do not have to file a tax return for the year. Hrblockfreefile    For 2014, the most that can be contributed to your traditional IRA is $5,500 ($6,500 if you are age 50 or older at the end of 2014). Hrblockfreefile Prev  Up  Next   Home   More Online Publications

Topic 607 - Adoption Credit and Adoption Assistance Programs

Tax benefits for adoption include both a tax credit for qualified adoption expenses paid to adopt an eligible child and an exclusion for employer-provided adoption assistance. For tax years 1997 through 2009, the credit is nonrefundable. For 2010 and 2011, the credit is refundable. For tax years after 2011 the credit is nonrefundable. For 2013 the credit has a maximum amount (dollar limitation) of $12,970 per child.

Qualified adoption expenses

For both the credit and the exclusion, qualified adoption expenses, defined in section 23(d)(1) of the Code, include reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging while away from home) and other expenses that are directly related to and for the principal purpose of the legal adoption of an eligible child. An eligible child must be under the age of 18, or be physically or mentally incapable of caring for him- or herself.

Qualified adoption expenses do not include expenses that a taxpayer pays to adopt the child of the taxpayer's spouse. Qualified adoption expenses include expenses incurred by a registered domestic partner who lives in a state that allows same-sex second parent or co-parent to adopt his or her partner’s child.

Income and dollar limitations

The credit and exclusion are each subject to an income limitation and a dollar limitation. The income limit on the adoption credit or exclusion is based on your modified adjusted gross income (MAGI). For tax year 2013, the MAGI phaseout begins at $194,580 and ends at $234,580. Thus, if your MAGI is below $194,580 for 2013, your credit or exclusion will not be affected by the MAGI phaseout but, if your MAGI for 2013 is above $234,580, your credit or exclusion will be zero. If your MAGI for 2013 falls between $194,580 and $234,580, your credit or exclusion will be reduced.

The credit and exclusion are each limited to a specific dollar amount ($12,970 for tax year 2013) for each effort to adopt an eligible child. The dollar limit for a particular year must be reduced by the amount of qualified adoption expenses used in the previous years for the same adoption effort. For example, if you claimed a $3,000 credit in connection with a domestic adoption in 2012 and paid an additional $12,970 of qualified adoption expenses in 2013 (when the adoption became final), the maximum credit you can claim in 2013 is $9,970 ($12,970 dollar limit, less $3,000 of qualified adoption expenses claimed in 2012).

The dollar limitation applies separately to both the credit and the exclusion, and you may be able to claim both the credit and the exclusion for qualified expenses paid in adopting an eligible child. However, any allowable exclusion must be claimed before any allowable credit is claimed. Any exclusion of expenses reduces the amount of qualified adoption expenses available for the credit, and you cannot claim both a credit and an exclusion for the same expenses. Examples 1, 2, and 3 illustrate these rules.

Example 1. In 2013 the following events occur: (a) You pay $12,970 of qualified adoption expenses in connection with an adoption of an eligible child; (b) your employer reimburses you for $2,970 of those expenses; and (3) the adoption becomes final. Your MAGI for 2013 is less than $194,580. Assuming all other requirements are met, you can exclude $2,970 from your gross income for 2013. However, the expenses allowable for the adoption credit are limited to $10,000 ($12,970 total expenses paid, less $2,970 employer reimbursement).

Example 2. The facts are the same as in Example 1, except that you pay $17,970 of qualified adoption expenses and your employer reimburses you for $5,000 of those expenses. Assuming all other requirements are met, you can exclude $5,000 from your gross income for 2013 and claim a $12,970 adoption credit ($17,970 total expenses paid, less $5,000 employer reimbursement).

Example 3. The facts are the same as in Example 1, except that you pay $30,000 of qualified adoption expenses and your employer reimburses you for $12,970 of those expenses. Assuming all other requirements are met, you can exclude $12,970 from your gross income for 2013. You can also claim a credit of $12,970. The remaining $4,060 of expenses ($30,000 total expenses paid, less $12,970 dollar-limited exclusion, less $12,970 dollar-limited credit) cannot be used for either the exclusion or the adoption credit.

Timing rules: When can you claim the credit?

The tax years for which you can claim the credit depend on when the expenses are paid, whether the adoption is domestic or foreign, and whether the adoption has been finalized. Generally, the credit is allowable whether the adoption is domestic or foreign. A domestic adoption is the adoption of a U.S. child (an eligible child who is a citizen or resident of the U.S. or its possessions before the adoption effort begins). A foreign adoption is the adoption of an eligible child who is not yet a citizen or resident of the U.S. or its possessions before the adoption effort begins.

In domestic adoptions, qualified adoption expenses paid before the year the adoption becomes final are allowable as a credit for the tax year following the year of payment (and the credit is allowable even if the adoption is never finalized). For a foreign adoption, however, qualified adoption expenses are allowable as a credit only if the adoption has been finalized. Qualified adoption expenses paid before and during the year when a foreign adoption is finalized are allowable as a credit for the year when it becomes final. Once an adoption becomes final, qualified adoption expenses paid during or after the year of finality are allowable as a credit for the year of payment, whether the adoption is foreign or domestic.

As a result of these timing rules, a taxpayer may sometimes claim a credit for both prior-year and current-year qualified adoption expenses in the year of finality. Example 4 illustrates them.

Example 4. An adoptive parent pays qualified adoption expenses of $3,000 in 2011, $4,000 in 2012, and $5,000 in 2013. In 2013, the adoption becomes final.

If the adoption was domestic, the adoptive parent may claim the $3,000 of expenses paid in 2011 as a credit on the parent’s 2012 tax return. The adoptive parent claims both the $4,000 paid in 2012 and the $5,000 paid in 2013 as a credit on the parent’s 2013 tax return. The $4,000 credit is claimed on the 2013 return because 2013 is the year after the year in which the $4,000 was paid, and the $5,000 is claimed on the 2013 return because 2013 is the year when the adoption becomes final. Since the adoption credit is nonrefundable for tax years ending after December 31, 2011, the $9,000 claimed on the 2013 tax return can be used to reduce any tax liability owed for 2013, and the excess, if any, will carry forward to the next year.

If the adoption was foreign, the adoptive parent claims all $12,000 in qualified adoption expenses ($3,000 paid in 2011, $4,000 paid in 2012, and $5,000 in 2013) on the adoptive parent’s 2013 tax return because 2013 is the year when the adoption becomes final.

Adoption of U.S. children who have been determined by a state to have special needs

In the case of an adoption of a U.S. child that a state has determined has special needs, you may be eligible for the maximum amount of credit or exclusion for the year of finality, even if you paid no qualified adoption expenses. A child is considered to have special needs for purposes of the adoption credit if all of the following conditions are met:

  1. The child was a U.S. citizen or resident when the adoption effort began;
  2. A state determines that the child cannot or should not be returned to his or her parent's home; and
  3. A state determines that the child probably will not be adopted unless assistance is provided to the adoptive family.

The definition of "children with special needs" for purposes of the adoption credit is narrower than the definitions of "children with special needs" for other purposes. For purposes of the adoption credit, foreign children are not considered special needs. Additionally, many U.S. children who have disabilities are not considered special needs for the purposes of the adoption credit. Generally, special needs adoptions are the adoptions of children whom the state's child welfare agency considers difficult to place for adoption.

Filing status

There are five filing statuses:

  • Single
  • Married filing jointly
  • Married filing separately
  • Head of household, and
  • Qualifying widow(er) with dependent child

If you file a return as single or as a qualifying widow(er) with dependent child, you are eligible to claim the adoption credit or the exclusion. Generally, if you are married, you must file a joint return to claim the adoption credit or exclusion. However, a married individual who is considered to be unmarried for tax purposes, as well as a single individual, may be eligible to file as head of household under some circumstances. If you file as head of household, you are eligible to claim the adoption credit or the exclusion. For more information on filing status, see Publication 501, Exemptions, Standard Deductions, and Filing Information.

If your filing status is married filing separately in the year when particular qualified adoption expenses are first allowable, you are ineligible to claim the credit or exclusion for the particular expenses. In order to claim the credit or exclusion, you may need to amend your return to change your filing status to "married filing jointly" within the period of limitations. Example 5 illustrates this rule.

Example 5. Husband and wife pay qualified adoption expenses of $3,000 in 2011, $4,000 in 2012, and $5,000 in 2013 in connection with a domestic adoption. In 2013, the adoption becomes final. Husband and wife file their 2011 and 2012 returns using the married filing separately filing status, but change their filing status to married filing jointly when filing their 2013 return.

Husband and wife’s filing status for 2011 is irrelevant for purposes of the adoption credit because the $3,000 of qualified adoption expenses that they paid in 2011 are not first allowable until 2012. But because husband and wife’s filing status for 2012 is married filing separately, they cannot claim the $3,000 of qualified adoption expenses that they paid in 2011. However, the $9,000 of qualified adoption expenses first allowable in 2013 ($4,000 paid in 2012, plus $5,000 paid in 2013) can be claimed on the 2013 tax return because husband and wife’s filing status for 2013 is married filing jointly.

Form 8839 and instructions

To claim the credit or exclusion, complete Form 8839 (PDF), Qualified Adoption Expenses, and attach the form to your Form 1040 (PDF) or Form 1040NR (PDF).

There is no longer a requirement to attach the adoption documentation with your tax return. However, documentation must be kept as part of your records.

The IRS encourages taxpayers to e-file their Federal income tax returns. The 2013 Form 8839 can be e-filed. Consequently, taxpayers who e-file their tax returns do not need to print and mail completed forms to the IRS.

Page Last Reviewed or Updated: December 12, 2013

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Hrblockfreefile Publication 555 - Introductory Material Table of Contents Future Developments What's New Important Reminder IntroductionOrdering forms and publications. Hrblockfreefile Tax questions. Hrblockfreefile Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 555, such as legislation enacted after it was published, go to www. Hrblockfreefile irs. Hrblockfreefile gov/pub555. Hrblockfreefile What's New Same-sex marriages. Hrblockfreefile  For federal tax purposes, individuals of the same sex are married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Hrblockfreefile The term "spouse" includes an individual married to a person of the same sex if the couple is lawfully married under state (or foreign) law. Hrblockfreefile However, individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that is not called a marriage under state (or foreign) law are not married for federal tax purposes. Hrblockfreefile The word “state” as used here includes the District of Columbia, Puerto Rico, and U. Hrblockfreefile S. Hrblockfreefile territories and possessions. Hrblockfreefile It means any domestic jurisdiction that has the legal authority to sanction marriages. Hrblockfreefile The term “foreign country” means any foreign jurisdiction that has the legal authority to sanction marriages. Hrblockfreefile If individuals of the same sex are married, they generally must use the married filing jointly or married filing separately filing status. Hrblockfreefile However, if they did not live together during the last 6 months of the year, one or both of them may be able to use the head of household filing status. Hrblockfreefile For details, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Hrblockfreefile Also see Revenue Ruling 2013-17 and Answers to Frequently Asked Questions for Individuals of the Same Sex Who Are Married Under State Law on IRS. Hrblockfreefile gov. Hrblockfreefile Important Reminder Photographs of missing children. Hrblockfreefile  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Hrblockfreefile Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Hrblockfreefile You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Hrblockfreefile Introduction This publication is for married taxpayers who are domiciled in one of the following community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin. Hrblockfreefile This publication does not address the federal tax treatment of income or property subject to the “community property” election under Alaska state laws. Hrblockfreefile Community property laws affect how you figure your income on your federal income tax return if you are married, live in a community property state or country, and file separate returns. Hrblockfreefile If you are married, your tax usually will be less if you file married filing jointly than if you file married filing separately. Hrblockfreefile However, sometimes it can be to your advantage to file separate returns. Hrblockfreefile If you and your spouse file separate returns, you have to determine your community income and your separate income. Hrblockfreefile Community property laws also affect your basis in property you inherit from a married person who lived in a community property state. Hrblockfreefile See Death of spouse , later. Hrblockfreefile Registered domestic partners. Hrblockfreefile    This publication is also for registered domestic partners who are domiciled in Nevada, Washington, or California. Hrblockfreefile Registered domestic partners in Nevada, Washington, or California generally must follow state community property laws and report half the combined community income of the individual and his or her registered domestic partner. Hrblockfreefile   Registered domestic partners are not married for federal tax purposes. Hrblockfreefile They can use the single filing status, or if they qualify, the head of household filing status. Hrblockfreefile    You can find answers to frequently asked questions by going to www. Hrblockfreefile irs. Hrblockfreefile gov/pub555 and clicking on Answers to Frequently Asked Questions for Registered Domestic Partners and Individuals in Civil Unions under Other Items You May Find Useful. Hrblockfreefile Comments and suggestions. Hrblockfreefile    We welcome your comments about this publication and your suggestions for future editions. Hrblockfreefile   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Hrblockfreefile NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Hrblockfreefile Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Hrblockfreefile   You can send your comments from www. Hrblockfreefile irs. Hrblockfreefile gov/formspubs. Hrblockfreefile Click on “More Information” and then on “Give us feedback on forms and publications. Hrblockfreefile ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Hrblockfreefile Ordering forms and publications. Hrblockfreefile    Visit www. Hrblockfreefile irs. Hrblockfreefile gov/formspubs to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Hrblockfreefile Internal Revenue Service 1201 N. Hrblockfreefile Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Hrblockfreefile    If you have a tax question, check the information available on IRS. Hrblockfreefile gov or call 1-800-829-1040. Hrblockfreefile We cannot answer tax questions sent to either of the above addresses. Hrblockfreefile Useful Items - You may want to see: Publication 504 Divorced or Separated Individuals 505 Tax Withholding and Estimated Tax 971 Innocent Spouse Relief Form (and Instructions) 8857 Request for Innocent Spouse Relief 8958 Allocation of Tax Amounts Between Certain Individuals in Community Property States  See How To Get Tax Help near the end of this publication for information about getting these publications and forms. Hrblockfreefile Prev  Up  Next   Home   More Online Publications