Monday, April 4, 2011

Adoption tax credit nets family $54,000 refund

From CNN Money:
The Wards couldn't believe the news when their tax preparer called to tell them they're getting a $54,000 refund this year.


Thelma Ward was speechless. She had to hand the phone to her husband so she could dance around the living room floor in shock.

* * *

So what's bringing this windfall? The federal adoption tax credit.

In the past few years, the Wards have expanded their already big clan of seven children by adopting five new kids. For each of these adopted children, they are eligible for a one-time tax credit of up to $13,170.

The credit has been around since 1997, but this tax season it is refundable for the first time -- which is the tax equivalent of hitting the jackpot.

A refundable tax credit lets you get the cash even if you owe no taxes. A non-refundable credit just offsets any taxes you owe, and then rolls anything remaining to the next tax year.

* * *

"When this was first coming through the tax reform legislation, we just kept looking at it going, 'Wow, this is really, really significant for people adopting,'" said Kathy Pickering, executive director of The Tax Institute at H&R Block. "It's not a large population who can claim it, but for those who do, it can really change their lives."


A typical private adoption runs about $30,000, so the credit was intended to help families by reimbursing expenses, such as court fees. But the tax law allows parents who adopt "special needs" children to receive the entire credit even if they had no expenses.

All of the Wards' foster children qualified as special needs, so Thelma was able to claim the full credit even though there were no adoption expenses. This is not unusual for foster children; about 80% of these kids are considered to have "special needs."
 What do you think? There's certainly nothing wrong with taking a legal tax credit. And there's no suggestion that this family is in it for the tax break. But I keep hearing this line from an article about why Kyrgyzstan officials are reluctant to lift their freeze on international adoption:  "Some people also assume that since American families that adopt receive certain financial benefits and tax breaks, they must be doing it less out of the goodness of their hearts and rather to supplement their income."

11 comments:

thewonderfulhappens said...

Wow. I had no idea that you could receive the credit even if you had not incurred any expenses. I find that a bit odd and it doesn't really go along with the purpose of helping to offset expenses.

On the other hand, we have an orphan crisis in our foster care system full of older children and sibling groups that many will not step forward to adopt. While monetary gain should NEVER be a reason to adopt, it must be a welcome surprise to the parents who do choose to welcome these more difficult to place children into their home.

1-2-TheeMotimes said...

I see nothing wrong with the tax credit. Actually, I think it's wonderful for families who want to adopt, but are having trouble financing it. For the families who have to mortgage the house or take out a personal loan, the tax credit would help pay some of that debt off.

Anonymous said...

1-2-theemotimes......should we adopt when we can't afford it?....would we be so willing to re-mortgage our house and take out loans to help a child stay with their mother?.....i am an ap...who wonders why $ has to be involved at all...i think if we followed this tax break money trail we would find it is not for humanitarian needs but political.....

keri

Anonymous said...

Ummm... Anon. Keri,

Should we as a nation continue to subsidize families that cannot or will not pay their own way? For how long? Who gets to determine the criteria? Until the child is grown? How many generations?

So we help some, but not others. Help some, but heaven forbid an adoptive family recovers some of their expenses.

So......we,


Fund health care, provide school lunches, respite care, aid to women/dependent children?

Unemployment benefits for almost 2 years? Etc... Fertility treatments for couples? Medicinal support for men with erection issues? Aid for illegals? Hand out cell phones for free....

Umm...seems to me we are all already paying ~ one way or another.

Additionally, they estimate now it takes about 1.5 million dollars to raise a child from infancy to adulthood; the adoption tax credit is chump change towards that end.

Furthermore if Kyg. wants to use this as an example, they will. But even without it, they would have cited some rationale. The bigger question is why can't they take care of their own? Or won't....Rather than address that, they prefer to accuse the motives of adoptive families, thus taking the spotlight off of their own deficiencies. Fine if they wish to do away with IA ~ but don't make adoptive families the scapegoat.

As to families benefitting from this having paid no adoption related expenses or having paid any taxes: seems like shaky ground to me, but I'm not at all surprised. And afterall, lots of folks don't actually "pay" taxes and still recieve a return each year: child tax credit.

Anon. Becky

Anonymous said...

I thought the same thing about the article on Kryz adoption when I read this article. I hope to God people don't go running out to try to adopt kids thinking that they are financial windfalls. It's bad enough that there are actually people who become foster parents because they think they will get paid a lot of money from the gov't for doing that.

Anonymous said...

"Some people also assume that since American families that adopt receive certain financial benefits and tax breaks, they must be doing it less out of the goodness of their hearts and rather to supplement their income." Just have to point out that this is completely off-base. The tax credit for international adoptions only applies to money actually spent on adoption, which is going to add up to way more than $13,000. That "special Needs" windfall is strictly for domestic foster-care type adoptions. The only tax break for adopting internationally is the same child tax credit that everyone else gets.

But of course, if people in other countries really think we are harvesting organs, then I guess a supposed financial incentive isn't that far-fetched.

Anonymous said...

i see families fundraising, using tax credit, etc to adopt a special needs child. i only hope that for many special needs children, it is only the beginning. they have to be able to financially support that child once it gets homes and if the child requires medical and theraputic support. even w/ medical insurance, it can be very expensive. not to deter, but to be realistic-- it's beyond the adoption trip.

Anonymous said...

i meant to write: i hope for potential adoptive families adopting special needs children they realize it can be only the beginning.

Reena said...

Oh, there is something I hadn't thought of.

If a family fundraises for an adoption and/or receives grant money from a place like Kingdom kids to compelte an adoption--- do they still get the tax refund?

Is the $$ subtracted out? I am guessing "no" if from a fundraiser but "maybe" if from a grant.

Mahmee said...

If the tax credit helps motivate good parents to adopt children that need families, why not? And I don't see how a mere $50k in benefits is going to do much to help this particular family handle the costs that will arise with 5 special needs children. If people actually think they are going to make money by adopting, they are lunatics.
M.

Anonymous said...

For some reason, this article REALLY bothers me. When I first read Kyg. claimed adoptive parents did it for financial gain, I thought they were crazy. Now I see they have some validity to say this. I know in China, once my daughter's SWI started doing international adoptions and receiving the $3000/child from adoptive parents, the number of so-called abandonments sky-rocketed. Now I'm learning they really weren't true abandonments but family planning confiscations. I truly believe any time you introduce the ability of one party to make money in an adoption, you invite trouble and the risk that some people will be adopting for the wrong reasons or offering children for the wrong reasons. Examples of this can easily be found in other foreign countries like India, Ethiopia and Guatemala.