Adoption Tax Credit

Thanks to all of your help and support, on January 2, 2013, Congress passed a bill to avert the “fiscal cliff,” ensuring the permanency of the adoption tax credit and extending the tax credit as it was in the 2001 Economic Growth and Tax Relief Reconciliation Act.

The credit will remain "flat" for special needs children, meaning families who adopt a child with special needs do not need to document qualified adoption expenses. A significant majority of foster children are considered special needs.

For all other adoptions the tax credit has been declared nonrefundable, only benefitting those adoptive families with a federal income tax liability.

The adoption tax credit applies to all types of adoption and has made adoption a more viable option for many families who may not have the funding to afford adoption otherwise. By preserving this credit and keeping the costs of adoption at a minimum, the incentive for parents to adopt increases, subsequently increasing the opportunity to provide more children with the loving, permanent families they deserve.

We are pleased that the adoption tax credit has been saved, but understand the importance to advocate that it be refundable, which we will do. Congress has expressed interest in long-term solutions and border tax policy reform leaving room to believe that there is a good opportunity for continued support on this subject.

For more information about the Adoption Tax Credit and ongoing advocacy strategies,

Please visit: www.adoptiontaxcredit.org .

Adoption Tax Credit

With just over 2 months to go to file 2011 taxes, we wanted to remind you about the Adoption Tax Credit. Information provided by Voice For Adoption.

The Facts:

• Since 2003, families who adopted a U.S. child with special needs from foster care could claim a federal adoption tax credit even if they had no adoption expenses (as long as they met the fairly generous income requirements). 
• Children who receive adoption assistance/subsidy benefits are considered children with special needs. Even families who receive a deferred subsidy ($0 per month but medical coverage through the subsidy program) are eligible. 
• All adoptive families (except those who adopted a step-child) are eligible for the credit, but those who adopt children other than those with special needs must have—and be able to document, if requested by the IRS—qualified adoption expenses. 
• For 2010 and 2011 the credit was made refundable. If parents who adopted as long ago as 2005 had credit to carry forward into 2010, that amount of the credit also became refundable. In 2010 and 2011, parents can claim the credit even if they don’t have income or any tax liability. 
• The amount of the credit for 2011 is $13,360 per child. 

The Information:
IRS Form 8839 Instructions: http://www.irs.gov/pub/irs-pdf/i8839.pdf
IRS Form 8839: http://www.irs.gov/pub/irs-pdf/f8839.pdf
IRS – adoption tax credit FAQ’s: http://www.irs.gov/individuals/article/0,,id=231663,00.html

Tools & Resources from the North American Council on Adoptable Children (NACAC): http://www.nacac.org/taxcredit/taxcredit.html