Did you know your company can provide financial assistance on a tax-free basis to employees who are adopting a child?
IRC Sec. 137 allows an employer to provide up to $5,000 per adopted child on an aggregate, not annual, basis (or $6,000 for an adopted child with special needs).
You’re also eligible to provide up to $10,000 for all adoptions effective with taxable years beginning after 2001 for qualified adoption expenses. Qualified adoption expenses are defined as reasonable and necessary adoption fees, court costs and legal fees which are directly related to the legal adoption of an eligible child.
IRC Sec. 23 provides a tax credit, but the adoptive parents cannot claim both the tax credit and the Sec. 137 exclusion for the same expenses. The exclusion and the tax credit are phased out when the adoptive parents’ adjusted gross income exceeds $115,000.
Assisting employees in this area sends a message to your employee culture. Talk to your accounting firm for tax advice and to get the necessary forms. Source: Arnoff and Associates Inc., (440) 717-1775