Thursday, April 5, 2012

The Adoption Tax Credit

When we were first looking into adoption, we knew it could range from fairly expensive to CRAZY expensive. Agency fees, court costs, attorney fees, travel expenses, etc. can add up pretty fast, especially if you face multiple failed adoption attempts. The Federal Adoption Tax Credit was mentioned in passing in some of the many meetings we attended prior to adopting Kal, but at the time that meant nothing to me. We would still need the money upfront for whatever expenses we incurred throughout the adoption, whether we'd get some of that back in taxes the next year or not. I was worried about having the money now when it was needed. Possible future money was irrelevant...

Fast forward a year - and dang, that adoption tax credit is a huge blessing! Domestic (non-special needs) adoption expenses incurred in 2011 can be claimed on your tax return filed in 2012. And, depending on your income, you can get a refundable tax credit for all your qualified adoption expenses up to a maximum of $13,170 per adoption. The key word here is refundable. It doesn't just lower the amount of taxes you owe (which would do me absolutely no good since my tax liability is relatively nonexistent), but it means it actually all comes back as a refund. Sweeeeeet.

In our case, Kal's adoption wasn't CRAZY expensive and we'll get refunded for every penny we spent. For those who adopted through more expensive agencies or incurred higher attorney fees and court costs (due to a contested adoption, maybe?), they'll be refunded the maximum amount.

I think that is ~amazing~ and I'm glad I went into adopting prepared to have all the costs be out-of-pocket. So now, the tax credit will kind of be taken as a welcome surprise (second Christmas, anyone?!). I know for some, adding to their family through adoption would've been out of the question financially if the adoption tax credit wasn't there to ease that burden. And looking forward, the availability of that tax credit could be the deciding factor on whether a family could adopt that year or not... whether they can afford a child that year or not!

Currently, that tax credit is still up in the air. We adopted in 2011 and can get that refundable tax credit on the refund we're filing in 2012. But unless the government extends that tax credit into 2012, 2013, and beyond... adoptions that take place after 2011 will not be refundable. The latest news is that the tax credit will be available for 2012 adoptions, but it's nonrefundable... and the tax credit won't be available at all in 2013.

That won't be a deciding factor in whether or not we try to adopt another baby this year. But for many families, it may just prevent them from being able to. And that's sad! There's a petition going on right now and you can show your support for adoption by signing it. Also, if you want to stay updated on the status of future adoption tax credits, is a good website (this is a good article, as well as their FAQ page)... you can sign up for their newsletter to get the most up-to-date info on it.

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