36.Ann and Bill were on the list of a local adoption agency for several years se

Question

36.Ann and Bill were on the list of a local adoption agency for several years seeking to adopt a child. Finally, in 2010, good news comes their way and an adoption seems imminent. They pay qualified adoption expenses of $ 4,000 in 2010 and $11,000 in 2011. The adoption becomes final in 2011. Ann and Bill always always file a joint income tax return.
a. Determine the amount of adoption expenses credit available to Ann and Bill assuming their combined annual income is $100,000. what year(s) will they benefit from the credit?
b. Assuming Ann and Bill's modified AGI in 2010 and 2011 is $200,000, calculate the amount of the adoption expense credit.

Explanation / Answer

(a) Sincethey have expenses of 15,000. , the credit is limited to $13,360. (b) adoption phase out range is 185,210 to 225,210. To figure out their credit, subtract 185,210 from their AGI: 200,000 – 185,210 = 14790. ==> 14790/40 = 0.370. ==> 13,360: 0.370*13,360 = 4943. Then subtract from 13,360: 13,360 - 4943 = 8417.

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