Understanding the Adoption Tax Exclusion and Its Benefits for Families
Definition & Meaning
The adoption tax exclusion is a provision in the federal tax code established by the Internal Revenue Service (IRS). It allows adoptive parents to exclude certain adoption-related benefits from their federal adjusted gross income. This exclusion applies to cash or other benefits provided by private-sector employers to help cover qualifying adoption expenses. Importantly, these benefits can often be combined with any available federal adoption expense tax credit, providing additional financial support for adoptive families.
Legal Use & context
This term is primarily used in the context of tax law, specifically regarding benefits available to adoptive parents. It is relevant in family law, as it relates to the financial aspects of adoption. Users may manage their tax filings related to the adoption tax exclusion using legal templates from US Legal Forms, which can help simplify the process of claiming these benefits.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A couple adopts a child and their employer provides $10,000 to cover adoption-related expenses. They can exclude this amount from their taxable income under the adoption tax exclusion.
Example 2: An individual adopts a child and receives a $5,000 reimbursement from their employer for adoption costs. This reimbursement can also be excluded from their adjusted gross income. (hypothetical example)