Adoption Tax Credit?

Question

Many people seem to think that a TAX Credit is some kind of deduction or some sort of welfare or entitlement program...

The Adoption Tax Credit is there to pay the costs of Adopting a child and for those families who adopt a special needs child.

Do You Know Where the $10,000 (plus) Tax Credit Money Comes From?

Answer 1

Look, it's like your medical expenses that aren't covered by insurance.  When we adopted, we had no kind of insurance to help with expenses like that.  When we had a baby I gave birth to, our medical insurance covered most of the cost.  What it didn't cover could be declared on our taxes under uncovered medical expenses, assuming we had enough expenses that year to make it worthwhile claiming them (and we did.)  The adoption credit is NOT a deduction, you can't even get the whole thing if your income is above a certain point.

My husband is a CPA, and we did get something like $8,000 in relief that way, but we spent around $20 K, so it's not like people are getting rich off of it.

And if people don't like the idea of adoptive parents being able to credit those expenses, then complain about people crediting their uncovered medical expenses and other things like that as well.  Don't pick on one group just because you have an axe to grind about adoption.

Answer 2

In Canada the adoption tax credit is for adoption expsenses, either for travel, legat etc.  WE don't qualify as their is no expenses for adoptiong from social services.

Answer 3

I completley agree with you and no I am unsure of where the tax credit comes from but I do know it is not cheap to adopt a child and it takes a very big heart to do so :)

Answer 4

I know all about the adoption tax credit.  I also know it was not intended for infant adoptions but for foster adoptions and some international adoptions.  It was SUPPOSED to be an incentive to give homes to children who most needed them.

And yet everyone is always crowing about how they get to write off 10k after adopting an infant.  Like they beat the system or something.

All I know is that I had two kids the old fashioned way and it cost money to do so and I didn't get to write any of it off.  What gives?

So people get to write off money that the rest of us don't get to write off.  Because they adopted.  

I am just tired of hearing people criticizing single mothers for making use of a system that was put in place for exactly the reason they are using it.  

But a tax credit is ok even when it is not being used as it was designed.  It makes no sense to me.

People who use the adoption tax credit when they are not adopting the way the credit was set up is just not cool in my book.

Answer 5

It isn't a grant or a bursary. I think it's if you adopt, then you can reduce your taxable income by 10 K. For example, if your income is 100000K then your taxable income would be 90K. You don't actually get an extra 10K in your pocket, and you might not even change tax brackets or pay less tax.

Answer 6

to my understanding it is more like a reinbusement of money that has already been paid and spent by the couple or person adopting.

My question is, do you know the Adoption Tax Credits reason for existance?

Answer 7

This is a tax credit which means it reduces your personal tax liability. The amount of the tax credit is based on income and there is a ceiling. If you make more than the ceiling then you don't qualify for the credit.

Answer 8

Our adoption credit was $10,390 of qualifying expenses.....that was spaced out over a 3 year period.

The actual cost of the adoption was over $27,000 and not a single penny went to an adoption agency. It was all lawyer and court fees.

In my opinion the credit should be larger Obama has already stated he would increase it. If I am not mistaken Bill Clinton passed it so it only stands to reason Hillary would increase it also. I am unsure of McCain's position.

I believe the money comes from taxpayer dollars.

If single and low income parents are entitled to welfare programs then adoptive parents are entitled to a fraction of that in the form of the adoption tax credit.

Answer 9

I was finally able to use the adoption tax credit this January... and I brought my son home in 2005!  The tax credit did not pay all my adoption fees, it certainly helped, but only covered less than 1/3 of my $30,000 documented and proved expenses for my son's international adoption.  I wish it paid for all adoptions/expenses.

I don't know where the credit comes from, but I'm glad its there, wish it was more, and am looking forward to your answer.

Answer 10

Plain and simple, it's reimbersment for adoption expences.

I think that the $10,000+ that is given back to the aparents after finalization could be better spent, funding adoptions throught DCFS.

Just an opinion.

Answer 11

the money comes from your paid taxes.  it is a federal grant type of reimbursement.  the money available doesn't appear out of nowhere.  it's a part of our federal reserve, which is in the negative as usual.   it comes from the same place money for welfare, social security, etc.. come from.  our working pockets.

the tax credit became law in 1997.  it was orginally proposed to encourage adoptions of special needs children.  but in the we must be fair to everyone society it covers any accepted adoption expense incurred for any type of adoption.  excpet for those of step parent type of adoptions.  

in 2002 the credit was raised from $5,000- around $10,000 with a maximum gross income of around 170,000.  if you claim more than that on your federal return then you do not qualify for the credit.  

in 2006 the amount was again raised to $11,390 for allowable adoption related expenses.  

this is a credit, it can be carried over up to 5 years after the initial claim.  you can only use this to offset your tax liability for that year.  so if you owe federal let's say $3,000 and after all other deductions and itemizations you still owe federal $1,500.  you will then use $1,500 of your tax credit.  that will be subtracted from the allowed federal amount and the remaining balance carried over into the next 4 years.  at the end of 5 years you can no longer claim a credit.

a few states followed suit and have their own adoption credit as well.  usually you can claim up to 25-75% of the amount of the credit you are claiming for federal to offset your tax liability for your state taxes.  

if you notice, once the amount of the federal tax credit goes up so does the fees agencies and attorneys charge for an adoption.  

examples of allowable reimbursable monetary claims are

expenses toward the mother relinquishing (such as any food, housing or utility)

expenses of the birth of the child

expenses for delivery of the child

some travel expenses

homestudy fees

agency fees

attorney fees, etc....

so if you adopt from foster care and your allowable reimbusements would be zero, therefore you would get zero available as a tax credit.  this law was brought about and fought for by same people who wish to keep OBC's sealed and open contact to a minimum.  it encourages infant adoption and the ongoing success of agencies.