Whatever you think of the new health care legislation, adoptive parents will realize one benefit: the Adoption Tax Credit, which was set to expire this year, will be renewed through December 21, 2011. The maximum reimbursable limit for adoption-related expenses was raised from $12, 150 to $13, 170. In addition, the Adoption Tax Credit will benefit families who have no taxes or a very small amount of taxes due, because it is now refundable. The credit lessens for adopters with income of over$ 180,000 per year, and continues to lessen as incomes go up until it is eventually phased out.
The Adoption Tax Credit is an actual credit, not a deduction. A deduction means that money spent can be exempted when calculating your taxable income. A credit means a direct lessening of your taxes for the amount, up to the maximum stated above, for the amount spent on qualified adoption-related expenses, such as agency fees, form filing fees, attorney fees. For a domestic infant adoption, birthmother’s medical care and living expenses during the pregnancy may be covered expenses.
Adoptive parents should be aware that it takes many months to get the money from the tax credit. The tax credit is good for the year the adoption is completely finalized. For example, we paid the lion’s share of adoption expenses in August of 2000, and our daughter came home in December of that year. The adoption was finalized in 2001, so we didn’t get our tax credit until the spring of 2002. We did what I’ve heard many adoptive parents do—take out a home equity loan which added a couple hundred dollars a month to our mortgage. We made the minimum payments for eighteen months, then paid it off in full as soon as we got our tax refund.
This tax credit goes a long way toward making domestic infant adoption and international adoption more affordable. The credit applies to adoptions of foster children in the U.S. as well, although adoptions from the foster care system usually involve very few fees. In addition, many states offer subsidies which can be used to pay children’s medical and counseling needs after the adoption. This encourages people to adopt children, ultimately saving the taxpayers money.
Some companies also offer adoption assistance, reimbursing a portion of eligible adoption expenses. I’d like to respectfully point out that many of the people who tell me they can’t afford to adopt could handle a couple hundred dollars a month by canceling their gym membership and their lawn care service. No one would bat an eyelash if I told them that my husband and I spent thirty thousand dollars on a car. (Our adoptions were significantly less than that.)
If not renewed by Congress, the credit will revert to the level that it was in $5,000 per year for domestic infant adoptions and $6,000 per year for special needs and foster care adoptions. This is the level allowed before the passage of the.Economic Growth and Tax Relief Reconciliation Act in 2001.
Bills to make the tax credit permanent have been introduced in both houses of Congress, most recently, in the 111th Congress, by Representative Wilson of South Carolina (House Resolution 213) and Senator Bunning of Kentucky (Senate Bill 2816). These sponsors are Republicans, but the bills have enjoyed wide bipartisan support. However, they have yet to make it to a full vote. While I am fully sympathetic to the major issues our representatives must educate themselves about, it seems to me that this would be a fairly simple way for Congress to ensure that the current recession does not prevent more families from coming together.
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