As we see year after year, our legislators in Washington push through tax law changes late in December. This past December was no exception as the SECURE Act was made law.
Use Your 401K or IRA Retirement Savings Penalty-Free
The SECURE Act changed laws relating to retirement savings. If you are considering adopting in 2020, you are now eligible to use $5,000 of your 401k or IRA retirement savings penalty-free towards your adoption costs. The distributions from your retirement accounts may still be taxable, but the distribution escapes the additional 10% penalty for early withdrawal.
The Non-Refundable Adoption Tax Credit Increased
Other tax law changes relating to adoption costs were also made. The non-refundable adoption tax credit increased to $14,300 for 2020. The full credit is available for special-needs adoptions, even if costs are less. The exclusion for company-paid adoption aid also increased to $14,300. And remember any unused adoption credit is eligible to be carried forward to up to 5 years future tax periods.
This is a guest post from Janet Houchen, CPA, and founder of Pro31 Tax and Accounting, LLC. She has a passion to work with owners and leaders in small business, both for-profit and nonprofit, to help their organizations grow and flourish.