Tax Season Can Be Educational

Posted by Crystal Killion Apr 1, 2008

Well, I finally got our taxes done and filed. I just couldn’t come up with any more excuses to hold off any longer.

Again this year, we qualify for the Adoption Tax Credit, since the adoption of our son was finalized in July of 2007. Although this is not the first time we have received the tax credit, I was still a little vague on the exact way the credit worked.

The first year we received the credit, our tax prep gal gave us the standard answer; however, last week I read the explanation that TurboTax has on their website and really understood it like I hadn’t before.

One thing that really had confused me was the term tax credit. My thinking was that we would receive any money over the amount of the taxes we owed. Not true. What happens is that when you qualify for the Adoption Tax Credit, the amount of the credit (which this year is a maximum of $11,390) is applied to any tax burden you have, then the remainder is rolled over to the next year, thus making your tax burden $0. In other words, if you owe the IRS $6,000 in taxes, the credit will be applied to that amount thus reducing your tax burden to $0, and then the remaining portion rolled over to the next year. The credit can be rolled over for a maximum of five years before it expires.

So, I guess doing my own taxes had a plus side to it- I learned something new. Now it’s time for my annual tax year resolution (that I never seem to keep)- “I will keep track of my receipts throughout the year, and record them each month, instead of waiting until the last minute.”