While it may not be a permanent tax credit, and it also may have been hidden in a seemingly un-related bill, the adoption tax credit *has* been extended another year. Hooray for small victories! See story below….
http://www.dispatch.com/live/content/local_news/stories/2010/04/09/adoption-credit-expanded.html
Low- and middle-income families who adopt children don’t have to miss out on a big tax break any longer.
If they don’t pay enough in taxes to allow for the credit for adoption-related expenses, the federal government will send them the difference in a refund. The credit tops out at $13,170.
That snippet of tax reform is part of the 2,000-page health-care law signed last month, and adoption advocates want to make sure prospective parents know about it.
“It’s been kind of buried in this huge thing,” said Mark McDermott, a Washington lawyer and member of the American Academy of Adoption Attorneys. “But it’s a big deal for families.”
The new provision replaces and expands the adoption tax credit that was to expire in December. While the old law allowed a credit of up to $12,170 for both international and domestic adoption expenses, it offered less to low-income families, who might not earn enough to owe much tax.
They also tend to be the ones who adopt through the child-welfare system.
“It’s good news for foster-care adoption,” said Rita Soronen, executive director of the Dave Thomas Foundation for Adoption. “This is something really significant that families will be able to take advantage of.”
Critics had charged that the 12-year-old law, whose original intent was to promote the adoption of children languishing in the U.S. foster-care system, disproportionately benefited foreign and domestic private adoptions by higher-income families.
One researcher found that, in 2005, more than 80 percent of $355 million in adoption tax credits were taken on behalf of private adoptions. About 17 percent of the tax benefits received went to families adopting through the public foster-care system.
“Now, we’re going to be able to get those families a cash refund,” said Susan Garner Eisenman, an Upper Arlington adoption lawyer.
The law is in effect through 2011 and applies to adoptions this year and next.
International adoptions generally are the most expensive on the front end, with some families spending as much as $40,000 on travel, paperwork and other requirements.
Foster-care adoptions rarely cost more than $2,500 for paperwork and home studies, which sometimes are paid by agencies.
But that doesn’t mean families don’t incur expenses with former foster children, most of whom are considered special-needs adoptions, Eisenman said. Under the law, only certain expenses are allowed, but families don’t have to document them if the adoption is of a special-needs child.
For higher-income families, the full credit is available for incomes up to $182,520, McDermott said. Beyond that, the amount of the credit decreases as income rises until it hits zero for those making $222,520 or more.
Soronen said the challenge is making sure families know about the law. One report found that, in 2004, a credit was claimed for just 21percent of foster-care adoptions.
“Very, very few of the folks taking advantage were adopting through the foster system,” she said. “This will, I hope, help them.”
