baby

Adoption Tax Credit: Retirement Savings Opportunity

If you have adopted a child recently, then you should know about the tax savings that you can take advantage of to help curb some of the cost to adopting.  But the Adoption Tax Credit offers families a unique opportunity to save for retirement.

The IRS has recently announced that the Adoption Tax Credit for 2012 is a non-refundable $12,650 per adopted child.  This means that if you have adopted a child in 2012, you are able to reduce your tax liability to zero, but won’t be able to get cash back like a refundable credit.  However, it is important to note that this tax credit can be rolled over for 5 years, giving you time to get the biggest bang for your buck.  If you want to know about the Adoption Tax Credit, check out this website.

But many middle-income earners still may not max out this credit within 5 years.  So here’s how to take full advantage of this credit.

A family, the Greens, is married with one child and they begin and finalize an adoption in 2012, costing the family $12,650 in expenses.  Because they want to save for retirement and reduce their current taxable income, they invest $5K each year in a traditional IRA.  If their taxable income is low enough, they might not be able to recoup all of their adoption expenses through the credit, even with the 5 year rollover allowance.  To get the most out of the credit, the Greens should consider options to reduce or defer their taxable income, and do the opposite.

Contribute to a Roth

One way to increase your current taxable income is to contribute to a Roth IRA instead of a traditional IRA.  Contributions to a Roth IRA are taxed at your current tax rate while contributions to a Traditional IRA are taxed at whatever tax rate you’ll pay in retirement.  The maximum contribution to a Roth IRA and a Traditional IRA in 2012 was $5000 per person per year, but has since increased to $5,500 for 2013.  

If the Greens find that they can rollover the Adoption Tax Credit for 5 years and take full advantage of it by contributing to a ROTH instead of a traditional IRA, they’ll have saved $12,650 in federal taxes.  However, the real value here is that they will have saved over $25,000 toward retirement totally tax free for each adult if they max out their Roth over the course of 5 years – no income tax now, tax-free capital gains within the Roth IRA, and tax-free withdrawals in retirement.

Rollover Your Traditional to a Roth

Another option available to the Greens is to rollover money they’ve already saved in their Traditional IRA into a Roth IRA.  Since they’ve already been putting money in to a Traditional IRA, they can simply rollover $25,000 into a Roth IRA.  (For more info on rolling over into a Roth, click here).  That $25,000 will be treated as income for the current tax year, but the Adoption Tax Credit will cover the large tax bill.  You get to take advantage of the benefits of a Roth IRA.

You’ve still got time

Though it’s 2013, you can still take advantage of this tax credit for 2012.  The IRS allows contributions for either type of IRA up to the day taxes are due to be credited to the previous year, April 15, 2013 for this year.  Remember to tell your financial institution that the contribution is for 2012.  If you want to rollover retirement funds to a Roth IRA, this transaction is taxable for the year in which the rollover is accomplished.

 

 

 

photo by: » Zitona «

121 thoughts on “Adoption Tax Credit: Retirement Savings Opportunity

  1. Pingback: Custom packaging boxes and custom paper bags supplier in china

  2. Pingback: football Highlight

  3. Pingback: Corporate Event Planners in Hyderabad

  4. Pingback: cosmetic dental tooth impants Boynton Beach

  5. Pingback: play soccer physics game online

  6. Pingback: DMPK

  7. Pingback: Bermain Olahraga

  8. Pingback: adme

  9. Pingback: Aws Engineer X

  10. Pingback: Late holiday deals

  11. Pingback: pendaftaran cpns 2018-2019 lulusan sma periode 2

  12. Pingback: coehuman.uodiyala

  13. Pingback: المهندس اوس الخزرجي

  14. Pingback: Law Diyala

  15. Pingback: iraqi Engineer

  16. Pingback: Software manajemen klinik

  17. Pingback: find a real estate agent

  18. Pingback: horoscope

  19. Pingback: GVK BIO New Deals

  20. Pingback: lowongan cpns th 2018

  21. Pingback: appliance repair Richmond Hill

  22. Pingback: guaranteedppc.com

  23. Pingback: warehouses for rent

  24. Pingback: wedding decorators in hyderabad

  25. Pingback: 먹튀신고

  26. Pingback: guaranteedppc.com

  27. Pingback: cmovieshd

  28. Pingback: read more

  29. Pingback: hoverboard for sale

  30. Pingback: free forex signals

  31. Pingback: Dwarka escort

  32. Pingback: toxicokinetics in rodents

  33. Pingback: Bangalore Escorts

  34. Pingback: Kolkata Escorts

  35. Pingback: Goa Escorts

  36. Pingback: Ambika Ahuja Jaipur Escorts

  37. Pingback: XXX PORN MODEL JAIPUR ESCORTS NEHA TYAGI

  38. Pingback: XXX JAIPUR ESCORTS ALIYA SINHA

  39. Pingback: XXX PORN BANGALORE COMPANION ESCORTS

  40. Pingback: XXX PORN Dhruvi Jaipur Escorts

  41. Pingback: XXX JAIPUR ESCORTS MODEL DRISHYA

  42. Pingback: Jiya Malik High Profile Jaipur Escorts Model

  43. Pingback: XXX FUN WITH JAIPUR ESCORTS PUJA KAUR

  44. Pingback: XXX BANGALORE ESCORTS SERVICES

  45. Pingback: XXX PORN SAPNA CHAUDHARY ESCORTS

  46. Pingback: Selly Arora Independent Bangalore Escorts

  47. Pingback: Enjoy With Jaipur Escorts Tanisha Walia

  48. Pingback: XXX PORN RUBEENA RUSSIAN BANGALORE ESCORTS

  49. Pingback: Bristy Roy Independent Bangalore Escorts

  50. Pingback: XXX PORN SRUTHI PATHAK MODEL ESCORTS

  51. Pingback: Bangalore Escorts Sneha Despandey

  52. Pingback: XXX PORN MODEL HONEY PREET ESCORTS

  53. Pingback: XXX PORN Radhika Apte Model Escort

  54. Pingback: Elizabeth Bay Locksmith

  55. Pingback: Ruby Sen Kolkata Independent Escorts

  56. Pingback: Diana Diaz Goa Independent Escorts Services

  57. Pingback: Diksha Arya Independent Escorts Services in Kolkata

  58. Pingback: Devika Kakkar Goa Escorts Services

  59. Pingback: Rebecca Desuza Goa Independent Escorts Services

  60. Pingback: Yamini Mittal Independent Escorts Services in Goa

  61. Pingback: Simmi Mittal Kolkata Escorts Services

  62. Pingback: Kolkata Escorts Services Ragini Mehta

  63. Pingback: Navya Sharma Independent Kolkata Escorts Services

  64. Pingback: Elisha Roy Goa Independent Escorts Services

  65. Pingback: Alisha Oberoi Kolkata Escorts Services

  66. Pingback: Divya Arora Goa Independent Escorts Services

  67. Pingback: Simran Batra Independent Escorts in Kolkata

  68. Pingback: Ashna Ahuja Escorts Services in Kolkata

  69. Pingback: Mayra Khan Escorts Services in Kolkata

  70. Pingback: Sofia Desai Escorts Services in Goa

  71. Pingback: Goa Escorts Services Drishti Goyal

  72. Pingback: Sruthi Pathak Escorts in Bangalore

  73. Pingback: Ambika Ahuja Jaipur Escorts Services

  74. Pingback: newtube sirius16

  75. Pingback: mesquitemoney.org447

  76. Pingback: mesquitemoney.org446

  77. Pingback: mesquitemoney.org608

  78. Pingback: comment898

  79. Pingback: comment57

  80. Pingback: comment910

  81. Pingback: comment699

  82. Pingback: comment449

  83. Pingback: comment23

  84. Pingback: comment873

  85. Pingback: comment485

  86. Pingback: comment691

  87. Pingback: comment70

  88. Pingback: comment902

  89. Pingback: comment215

  90. Pingback: comment257

  91. Pingback: comment164

  92. Pingback: comment711

  93. Pingback: comment170

  94. Pingback: comment531

  95. Pingback: comment712

  96. Pingback: comment169

  97. Pingback: comment744

  98. Pingback: comment474

  99. Pingback: comment445

  100. Pingback: comment537

  101. Pingback: comment386

  102. Pingback: comment135

  103. Pingback: comment623

  104. Pingback: comment307

  105. Pingback: comment700

  106. Pingback: comment976

  107. Pingback: comment244

  108. Pingback: comment442

  109. Pingback: comment961

  110. Pingback: comment284

  111. Pingback: comment353

  112. Pingback: comment839

  113. Pingback: comment682

  114. Pingback: comment687

  115. Pingback: comment705

  116. Pingback: comment260

  117. Pingback: comment255

  118. Pingback: comment646

  119. Pingback: comment470

  120. Pingback: comment79

  121. Pingback: Sruthi Pathak Bangalore Female Escorts

Comments are closed.