Question

Mr. and Mrs. Sloan incurred the following expenses during the current year, when they adopted a child: Child's medical expenses $5,000 Legal expenses 9,000 Agency fee 4,000 Before consideration of any "floor" or other limitation on deductibility, what amount of the above expenses may the Sloans deduct on their current year joint income tax return? gaodun

Answer 1

Answer: See explanation below for answer. The options are:

A. $13,000

B. $ 5,000

C. $18,000

D. $14,000

Explanation:

A taxpayer can deduct the medical expenses that have been paid for a child at the time of adoption if the child should qualify as the dependent of the taxpayer when the medical expenses were paid.

In addition, should a taxpayer pay an adoption agency for the medical expenses that the adoption agency has already paid, then the taxpayer is treated as though he/she has already paid those expenses.

In the scenario given above, Mr. and Mrs. Sloan can deduct the child's medical expenses of $5,000 that they have paid.

But on the other hand, the legal expenses of $9,000 and agency fee of $4,000 that were incurred in during the adoption process will be treated as nondeductible personal expenses.

However, Mr. and Mrs. Sloan will be able to claim a nonrefundable tax credit amounting up to $13,570 for these qualified adoption expenses.

Answer 2

Answer:

$5,000

Explanation:

As per recent tax laws, the legal fees are no longer deductible in income tax returns.

Advisory and agency were previously allowed as deduction from income but in recent legislation it is no longer deductible from income for income tax purposes.

Therefore only $5,000 incurred as medical expense are allowed as deduction.