The federal tax credit helps many families adopt. It is great
news that it was saved at the last moment. However, the lack of
refundability eliminates adoption assistance for many who do not
make enough to pay taxes. Below is the full article.
Legislation that averted the "fiscal cliff" also saved an
expiring tax credit - and finally made it permanent - for
families who adopt.
The Columbus Dispatch
Advocates lobbied hard to preserve the $10,000 federal
adoption-tax credit, which is scaled for inflation and was worth
a maximum of $12,650 for 2012. But they did not succeed in making
the credit refundable for low- and middle-income families whose
tax liability is less than the credit.
That means adoptive parents can't get back the difference, as
they could for the 2010 and 2011 tax years.
"It's basically good news," said Rita Soronen, president and CEO
of the Columbus-based Dave Thomas Foundation for Adoption. "The
tax credit passed, and it was made permanent. But refundability
is off the table now."
Soronen said the result is that some low-income adoptive families
will benefit little, if it all, from the credit. "And frankly,
those are the families who adopt out of foster care," she said.
"Refundability was critical, especially if they had no tax
According to Internal Revenue Service data for 2010, there were
about 97,000 adoption tax-credit filings nationwide. About 30
percent of the children adopted from foster care live in
households with incomes between 101 and 200 percent of the
poverty level, Soronen said. That compares with about 21 percent
of all children.
Children adopted from foster care also are less likely to live in
wealthier homes. About 21 percent of those adopted from foster
care live in households with incomes 400 percent or more of the
poverty level, compared with 30 percent of all children and about
58 percent of children adopted internationally.
"Refundability will just have to be an ongoing conversation,"
But families who adopt special-needs children, a category that
includes the vast majority of foster kids, won't have to document
their adoption-related expenses for the credit. Those families
also can claim the maximum credit for a special-needs child,
regardless of their expenses, if they pay enough in taxes.
All families, whether they adopt from foster care, privately or
internationally, can carry their credit forward to other tax
years if they don't have enough tax liability to use it all at
Megan Lindsey of the National Council for Adoption said the
credit is "an important layer of support for families who adopt."
Families with incomes under $150,000 are eligible for the full
credit, which gradually phases out for higher incomes.The
adoption credit first went into effect in 1997 and had been
extended but not made permanent until now
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