Adoption Tax Credit Made Permanent

This article is taken from The Christian Alliance for Orphans blog.

January 2nd, 2013 | by Jedd Medefind |    

 

There is much yet to analyze about the American Taxpayer Relief Act (“Fiscal Cliff” Bill) passed by Congress last night, but it is clear there’s at least one element orphan advocates can especially cheer: the Adoption Tax Credit has been saved.

The permanent extension of the Adoption Tax Credit not only guarantees vital financial help for families that choose to adopt. It also underscores the commitment of the American people to the idea that children need families.

The Adoption Tax Credit was set at $10,000 in 2001 under President Bush and adjusted for inflation going forward. My best current understanding is that this figure will continue to set the precise value of the credit going forward. (Thus set at roughly $12,770 in 2013). The credit will be available to families adopting both domestically and internationally as a credit for qualified adoption expenses. For special needs adoptions, the credit will be a flat amount (the $10,000 plus inflation) without regard to actual out of pocket expenses. This means that domestic foster adoptions of children with special needs will be eligible for the full maximum credit even if very little was spent in the adoption process. Finally, the Credit will also exempt from taxes any adoption benefits provided by employers. The fact that the Adoption Tax Credit is now permanent means that it won’t need to be renewed every year, as it has in recent years.

The credit begins to phase out at incomes above $190,000. The Credit is not “refundable”—meaning that it will not result in a payout from the government to those who have no tax liability. But, the credit can be carried over from year to year if a family isn’t able to claim it all in the first year.

As the recent happenings in Russia highlight, there remain many major challenges in regard to public policy and adoption—from helping countries establish expeditious adoption systems…to guarding against corruption in the process… to support of indigenous adoption efforts.

But today the permanent extension of the Adoption Tax Credit gives advocates for children something to cheer for…and a great start to 2013!

Dive off Fiscal Cliff to Affect Orphans & Children in Foster Care

Dive off fiscal cliff could be 'disastrous' for orphans, foster children, say advocates

 

By Joshua Rhett Miller

Published November 21, 2012

FoxNews.com

As talk of tax increases and deep cuts to government programs dominate Washington, adoption advocates are warning of another crisis should the adoption tax credit be allowed to expire at the end of the year — a potentially “disastrous” outcome for more than 400,000 children in the U.S. foster care system.

 

Among the so-called Bush tax cuts set to expire at the end of 2012 is a one-time adoption tax credit that gave $12,650 this year to families who took in a parentless child. But unless Congress acts to extend it, the only tax credit for adoptive parents on Jan. 1, 2013, will be to those who take in special needs children from within the United States. For them, the credit will be just $6,000.

“And it’s really not going to do much,” said Chuck Johnson, president and CEO of the National Council For Adoption. “Most families adopting those kids won’t even qualify for it because of the strict income requirements. It really would be a credit unclaimed at that point and that could have pretty disastrous impact for kids awaiting adoption in foster care.”

 

Adoptive families already suffered a blow in the current year, when the credit stopped being refundable — payable even to families with little or no tax liability — and became merely a deduction.

 

Roughly 423,000 children are living in the United States without permanent families, according to the Congressional Coalition on Adoption Institute, and 115,000 of them are eligible for adoption. But nearly 40 percent of those children wait longer than three years in foster care prior to being adopted.

To read the full article click here: http://www.foxnews.com/politics/2012/11/21/expiration-adoption-tax-credit-could-be-disastrous-for-orphans-foster-children/#ixzz2DNQF0Ikh

Save the Adoption Tax Credit is the effort of a national collaboration of organizations and individuals called the Adoption Tax Credit Working Group that have united to support the cause of adoption by advocating for the adoption tax credit. We know the adoption tax credit is an important resource to help children find forever families and make adoption affordable for all.

The adoption tax credit, which can be claimed for eligible adoption-related expenses, has helped thousands of American families offset the high cost of adoption since the credit was established in 1997. Since 2003, families that adopted children with special needs could claim the full credit regardless of their qualified adoption expenses. The credit has made adoption a more viable option for many parents who might not otherwise have been able to afford adoption, allowing them to provide children with loving, permanent families. With more than 100,000 children in U.S. foster care available for adoption, and countless millions of orphaned and abandoned children around the world, the continuation of the adoption tax credit is vital to providing love, safety, and permanency to as many children as possible.

The goal is have an adoption tax credit that is:

• Inclusive: Children, whether adopted from foster care, through intercountry adoption, or through private domestic adoption should be able to benefit from the adoption tax credit.

• Permanent: The adoption tax credit should become a permanent part of the tax code to ensure continued support to those who bring children into families through adoption.

• Refundable: The adoption tax credit should be refundable to ensure that families with moderate and lower incomes receive the full benefit of the credit.

• Flat for Special Needs: All families who adopt a child with special needs should be eligible for a “flat” tax credit, meaning they can claim the maximum credit without documenting expenses. This distinction, which is already in current law, recognizes the fact that many of the expenses associated with adopting children with special needs show up after an adoption is finalized.

If you would like to learn more and advocate for continuing the adoption tax credit, please visit http://adoptiontaxcredit.org/advocate/

Adoption Tax Credit Phone Forum

On behalf of the Internal Revenue Service, you are invited to join the Adoption Tax Credit Phone Forum on Friday, March, 23, 2012, at 12:00 pm Central Time.

What is the objective? To help families who have adopted children get the refundable adoption tax credit they deserve.

Many taxpayers claiming the expanded adoption credit, are not attaching the required documents to their paper tax returns. By participating in this call, the IRS will ensure that you are aware of the proper documentation necessary for you to receive your refund as a result of this important tax credit.

 During the phone forum, they will discuss:

• Legislative Action
• Requirements for claiming the credit
• Qualified Adoption Expenses
• Types of Adoptions
• Adoption Credit Audits
• Changes on the Horizon
• How you can help eligible taxpayers claim the credit
• Resources on IRS.gov to answer your questions

 Please join in on Friday, March, 23, 2012, at 12:00 pm Central Time to learn more about this important tax benefit for families.

To call in, please dial 1-866-606-4717 and use Access Code 7962786.

Adoption Tax Credit Advocacy

February 13, 2012 - The National Council For Adoption (NCFA), a longtime supporter of the adoption tax credit, joins fellow adoption and child welfare advocates in calling for the extension of the adoption tax credit for families adopting children via foster care, intercountry, or domestic infant adoption.

Since the adoption tax credit was first established in 1997, it has helped lessen the financial burden of adoption for thousands of income-qualifying American families that might not otherwise have been able to adopt.
The current maximum allowable adoption tax credit of $13,360 for all adoptive families is set to sunset on December 31, 2012. Unless Congress acts to extend or make permanent the adoption tax credit, it will revert at this time to a maximum of $6,000 for parents adopting children with special needs. No tax credit will be available to other adoptive parents.

To learn more, click here: https://www.adoptioncouncil.org/policy-priorities/adoption-tax-credit.html

Click here for you adoption Tax Credit Advocacy Kit: https://www.adoptioncouncil.org/images/stories/NCFA_Adoption_Tax_Credit_Advocacy_Kit.pdf

Six Things to Know About the Expanded Adoption Tax Credit

IRS Summertime Tax Tip 2011-10, July 27, 2011


If you are adopting a child in 2011, the Internal Revenue Service encourages you to familiarize yourself with the adoption tax credit. The Affordable Care Act increased the amount of the credit and made it refundable, which means it can increase the amount of your refund.

Here are six things to know about this valuable tax credit:

The adoption tax credit, which is as much as $13,170, offsets qualified adoption expenses making adoption possible for some families who could not otherwise afford it. Taxpayers who adopt a child in 2010 or 2011 may qualify if you adopted or attempted to adopt a child and paid qualified expenses relating to the adoption.

Taxpayers with modified adjusted gross income of more than $182,520 in 2010 may not qualify for the full amount and it phases out completely at $222,520. The IRS may make inflation adjustments for 2011 to this phase-out amount as well as to the maximum credit amount.

You may be able to claim the credit even if the adoption does not become final. If you adopt a special needs child, you may qualify for the full amount of the adoption credit even if you paid few or no adoption-related expenses.

Qualified adoption expenses are reasonable and necessary expenses directly related to the legal adoption of the child who is under 18 years old, or physically or mentally incapable of caring for himself or herself. These expenses may include adoption fees, court costs, attorney fees and travel expenses.

To claim the credit, you must file a paper tax return and Form 8839, Qualified Adoption Expenses, and you must attach documents supporting the adoption. Documents may include a final adoption decree, placement agreement from an authorized agency, court documents and the state’s determination for special needs children. You can still use IRS Free File to prepare your return, but it must be printed and mailed to the IRS, along with all required documentation. Failure to include required documents will delay your refund.

The IRS is committed to processing adoption credit claims quickly, but it also must safeguard against improper claims by ensuring the standards for this important credit are met. If your return is selected for review, please keep in mind that it is necessary for the IRS to ensure the legal criteria are met before the credit can be paid. If you are owed a refund beyond the adoption credit, you will still receive that part of your refund while the review is being conducted.

For more information see the Adoption Benefits FAQ page available at http://www.irs.gov/  or the instructions to IRS Form 8839, Qualified Adoption Expenses, which can be downloaded from the website or ordered by calling 800-TAX-FORM (800-829-3676).  http://www.irs.gov/newsroom/article/0,,id=242932,00.html

IRS Issues New Guidelines on Adoption Tax Credit

In July, a friend of the Alliance reached out to ask us if we could help them sort through the vagaries of the recently-enhanced adoption tax credit. Although it was widely known that the credit had been expanded, even many tax professionals were unsure how to apply it.

After some research, it was clear that information being provided by the IRS on how to claim the tax credit had not yet been updated to reflect the changes. So, we reached out to our friends at the Congressional Coalition on Adoption Institute (CCAI) to see if they could make the official request of the IRS for updated guidance. (Government agencies always seem to react most quickly when the request comes from the entity that sets their budgets, Congress.) CCAI consistently does tremendous work on the adoption, foster care and global orphan front, and they took up the request immediately. The IRS responded quickly. Today, the IRS issued new guidance for how adoptive families can claim the Adoption Tax Credit for 2010.

IRS Issues Guidance on Expanded Adoption Credit Available for Tax-Year 2010

WASHINGTON — The Internal Revenue Service today issued guidance on the expanded adoption credit included in the Affordable Care Act. The IRS also released a draft version of the form that eligible taxpayers will use to claim the newly-expanded adoption credit on 2010 tax returns filed next year.

The Affordable Care Act raises the maximum adoption credit to $13,170 per child, up from $12,150 in 2009. It also makes the credit refundable, meaning that eligible taxpayers can get it even if they owe no tax for that year. In general, the credit is based on the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses. Income limits and other special rules apply.

In addition to filling out Form 8839, Qualified Adoption Expenses, eligible taxpayers must include with their 2010 tax returns one or more adoption-related documents, detailed in the guidance issued today.

The documentation requirements, designed to ensure that taxpayers properly claim the credit, mean that taxpayers claiming the credit will have to file paper tax returns. Normally, it takes six to eight weeks to get a refund claimed on a complete and accurate paper return where all required documents are attached. The IRS encourages taxpayers to use direct deposit to speed their refund.

Taxpayers claiming the credit will still be able to use IRS Free File to prepare their returns, but the returns must be printed out and sent to the IRS, along with all required documentation.

Adoption Tax Credit

The Adoption Tax Credit was expanded under President Bush in 2001 from $5,000 to $10,000 and set to grow each year based on inflation. It is currently $12,150. However, unless Congress acts to extend it, the Credit will drop to only $5,000 at the end of 2010.

Two bills now in Congress recently would preserve the Adoption Tax Credit, including the "Adoption Tax Relief Guarantee Act" (HR213) introduced last week. This bill would also add an additional boost for domestic adoptions by reducing the wait time families currently must wait before receiving their tax credit.

We'll be keeping a close eye on developments on the Tax Credit, which provides major help to families as they shoulder costs of adoption. If you would like to track this bill yourself, visit http://www.govtrack.us%3econgress%3elegislation/.