Question

Sampson and Jaqueline had $2,500 in domestic adoption expenses in 2020, $2,500 in adoption expenses in 2021, and $5,000 in adoption expenses in 2022. The adoption was finalized on April 25, 2022. Which statement is TRUE about their Adoption Credit if they wish to claim the expenses as early as possible? They can claim:

O $10,000 in 2022.
O $5,000 in 2021 and $5,000 in 2022.
O $2,500 in 2021 and $7,500 in 2022.
O $2,500 in 2022, $2,500 in 2023, and $5,000 in 2024.

Answer 1

Sampson and Jaqueline can claim $2,500 in 2020, $2,500 in 2021, and $5,000 in 2022 for their adoption expenses, because the adoption tax credit allows them to claim qualified expenses for the years the expenses were incurred once the adoption is finalized.

Step-by-step explanation:

The true statement about Sampson and Jaqueline’s ability to claim adoption expenses as early as possible is that they can claim $2,500 in 2020, $2,500 in 2021, and $5,000 in 2022.

The reason for this is that the adoption tax credit allows taxpayers to claim qualified adoption expenses incurred in previous years if the adoption is finalized in a subsequent year.

In 2020 and 2021, since the adoption was not finalized, they can only claim the expenses incurred in those years. However, once the adoption is finalized in 2022, they can claim all the expenses from that year, as well as any remaining expenses carried forward from the previous years.