In late 2016, Randy and Rachel Erwin paid $7,000 in legal fees, adoption fees, a

Question

In late 2016, Randy and Rachel Erwin paid $7,000 in legal fees, adoption fees, and other expenses directly related to the adoption of an infant son, Jameson. In 2017, the year in which the adoption becomes final, they pay an additional $8,000. Their AGI in 2017 is $135,000.

a. Randy and Rachel are eligible for a $ adoption credit in 2017.

b. Assume the same facts but the taxpayer's AGI for 2017 is $210,000. Round any division to three decimal places and round your final answer to the nearest dollar.

Randy and Rachel are eligible for a $ adoption credit in 2017.

Explanation / Answer

a. Amount of couple's 2017 adoption tax credit if AGI is $135000 :

Randy and Rachel are eligible for $13570 credit in 2017 ( for expenses of $7000 + $8000, limited by the $13570 ceiling, paid in 2016 & 2017).

b. Amount of couple's 2017 adoption tax credit if AGI is $210000 then,

The amount of the credit is reduced as follows.

($210000--$203540)/$40000=0.1615 or 16.15%

$13570--(16.15%of $13570)

$13570--$2192

$11378 amount of adoption tax credit

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