Adoption Credit - Use in a future tax year question

#2 02-28-2005, 07:54 PM

Harlan Lunsford wrote:
- quote -

> Paul A Thomas wrote:
> > "DSF" <df190765[at]hotmail.com> wrote

> > > Is it possible to use only a portion or delay using the
> > > credit until a future tax year? Is the nature of an IRS "tax
> > > credit" in that you have to use it in the tax year you
> > > accrue it and can only use the remaining amount in future
> > > tax years if your tax liability were to fall below zero?
> > > > > Basically I am trying to use as little of the $10,000
> > > adoption credit as possible and use the majority of it in a
> > > future tax year (within the 5 year limit as defined by the
> > > IRS for an adoption credit that cannot all be used in a
> > > single tax year).

> > If you can, spread out the expenses over a few years. Other
> > than that, you'll have to reduce your taxable income, and
> > therefore the tax due, to carry forward the tax credit. It
> > gets used if there is a tax liability, carried forward if
> > not.

> By that, I think Paul is saying "spread out the PAYMENT of
> expense...."
> Right, Paul?

In my situation I had an international adoption thus I can
only take the credit in the year the adoption was finalized
(in contrast to domestic US adoptions where you can take the
credit starting in the year you start incurring expenses).

So there is no way to spread a credit over more than one
year unless you hit a tax liability of zero and are forced
to carry over the leftover? So for example using just a $1
of it in tax year 2004 (even though my tax liability was not
at zero) and then the rest lets say in tax year 2005 would
probably cause a red flag with the IRS...

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#1 02-27-2005, 01:34 PM

Paul A Thomas wrote:
- quote -

> "DSF" <df190765[at]hotmail.com> wrote

> > Is it possible to use only a portion or delay using the
> > credit until a future tax year? Is the nature of an IRS "tax
> > credit" in that you have to use it in the tax year you
> > accrue it and can only use the remaining amount in future
> > tax years if your tax liability were to fall below zero?
> > > Basically I am trying to use as little of the $10,000
> > adoption credit as possible and use the majority of it in a
> > future tax year (within the 5 year limit as defined by the
> > IRS for an adoption credit that cannot all be used in a
> > single tax year).

> If you can, spread out the expenses over a few years. Other
> than that, you'll have to reduce your taxable income, and
> therefore the tax due, to carry forward the tax credit. It
> gets used if there is a tax liability, carried forward if
> not.

By that, I think Paul is saying "spread out the PAYMENT of
expense...."

Right, Paul?

ChEAr$,
Harlan Lunsford, EA n LA

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02-25-2005, 01:29 AM

"DSF" <df190765[at]hotmail.com> wrote

- quote -

> Is it possible to use only a portion or delay using the
> credit until a future tax year? Is the nature of an IRS "tax
> credit" in that you have to use it in the tax year you
> accrue it and can only use the remaining amount in future
> tax years if your tax liability were to fall below zero?
> Basically I am trying to use as little of the $10,000
> adoption credit as possible and use the majority of it in a
> future tax year (within the 5 year limit as defined by the
> IRS for an adoption credit that cannot all be used in a
> single tax year).

If you can, spread out the expenses over a few years. Other
than that, you'll have to reduce your taxable income, and
therefore the tax due, to carry forward the tax credit. It
gets used if there is a tax liability, carried forward if
not.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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#-1 02-24-2005, 09:31 AM

Is it possible to use only a portion or delay using the
credit until a future tax year? Is the nature of an IRS "tax
credit" in that you have to use it in the tax year you
accrue it and can only use the remaining amount in future
tax years if your tax liability were to fall below zero?

Basically I am trying to use as little of the $10,000
adoption credit as possible and use the majority of it in a
future tax year (within the 5 year limit as defined by the
IRS for an adoption credit that cannot all be used in a
single tax year).

Thanks

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