Information on the Adoption Tax Credit

taxcreditBelow are some details that I received from the IRS relating to the adoption tax credit.

Documents substantiating the adoption or attempted adoption are required to be attached to the taxpayer’s return. Acceptable documents are identified in the September 2010 guidance and in IRS publications. In addition, the IRS may ask for proof of expenses if a return is under examination. All taxpayers are advised to keep receipts for expenses claimed on a tax return for at least three years. That applies whether the expenses are related to adoption, medical care, charitable giving, a business, or pretty much anything else. If the IRS asks for evidence to support an item claimed on a tax return and the taxpayer cannot offer any, the item may be reduced or disallowed. This is standard operating procedure.  The IRS has begun looking more closely at adoption claims. This is why you are now hearing about requests for verification of expenses. This relates to a statutory change that made the credit refundable. Before 2010, the credit merely offset taxes.  The adoption credit was modified by the Affordable Care Act (PL111-148, section 10909), and then by the December 17th tax extenders bill (PL111-312, section 1(b)). The IRS has not yet issued any official guidance on the latter modification. We’ve recently launched webpage, Adoptive Parents: Don’t Delay Your Adoption Credit Refund. It contains a great deal of information on the refund, including necessary documentation, FAQ’s, etc. Continue reading

Tax Information for those Finalizing Adoptions in SC

(The following post is from Nightlight’s Adoption Funding & Adoption Grants Resource Packet, available at our Adoption Funding Resources page.)

Post Adoption Financial and Other Resources

Tax Credit: $13,170

Great news: The adoption tax credit has increased, and you could get a tax refund!!!

The Adoption Tax Credit has been extended another year, and starting this year, it has increased to $13,170. So if you adopted this year or next, you can receive not only a tax credit of $13,170 but for the first time, the tax credit is refundable. Except for the increase in the amount of credit you receive and the fact that the tax credit is refundable, the previous rules remain essentially the same.

What this means to, you, the adoptive families:

The adoption tax credit will not sunset on December 31, 2010; it has been extended to December 31, 2011.

You may apply up to $13,170 of your adoption expenses toward your federal taxes when you file your 2010 or 2011 taxes. Continue reading

New Resource: Financing Your Adoption with Grants, Loans, and Tax Credits

Nightlight Christian Adoptions has recently made available an updated 10-page guide to funding the expenses of your adoption. The resource guide provides detailed information concerning the new Federal Tax Credit/Refund for Adoption. The Financing your Adoption resource list is available at our Funding Your Adoption Resource Page.

The resource guide covers the following topics:

  • Federal and State Government
  • Employer Adoption Benefits
  • Grant Programs
  • Loan Programs
  • Special Needs Adoptions
  • Military Adoptions
  • Fundraising

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

The following comes from the IRS Newswire:

IR-2010-100, Sept. 29, 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. Continue reading

Should Christmas be canceled when you are pursuing adoption?

BodeChristmasThis is actually a question I have posed to myself — tongue in cheek — because we have had five of our children placed with us during the days immediately before Christmas and have wrestled with the same dilemma each time. The problem isn’t whether we should celebrate the birth of Christ, but whether we should invest in the economic side of how we do it in America. Tree, gifts, spiral ham and sparkling cider — we are not talking about gross excess here, but the simple things that are a traditional part of our culture. It’s the question of spending money that does not absolutely have to be spent while we are facing the inevitable reality of significant bills related to adoption.

With the joy of each new child, we have to work through this issue to a place where we are comfortable balancing everyday life with the need to save for those looming bills. Five separate times my Christmas list has only had two items on it: A new baby and a new Bible. Continue reading

Family Legacies: Helping orphans through interest free adoption loans

Family Legacies, Inc. is a 501(c)(3) charitable nonprofit organization. From Family Legacies’ website: “It is the purpose of Family Legacies, Inc. to help make adoption a reality for prospective parents who do not have the funds to pay for the total cost of the adoption.”

According to Brent Nelson, Family Legacies’ Development Director, all gifts to Family Legacies are tax deductible and will multiply over and over for years to come. For example, a $5,000 gift effectively helps 8 orphans to be adopted in a 10 year period. Think about it: $5,000 becomes $40,000 in 10 years. And that same original gift will continue to be used over and over after 10 years. What a great investment!

On a side note, I’ve interacted with Brent Nelson several times over the past many months. I don’t know of anyone who is more passionate about God’s heart for orphans. In a recent newsletter Brent wrote: Continue reading

Employers step up

Employers step up with benefits as adoption becomes more difficult

September 2, 2007

BY SUE SCHELLENBARGER The Wall Street Journal

workplaceAdopting a child from overseas has never been easy. But new restrictions on overseas adoptions have made the process much tougher, causing added stress and job disruptions for would-be parents.

The changes are demanding more patience on the part of adoptive parents, better planning and communication at work with bosses and coworkers, and more flexibility on the part of employers. Fortunately for some, the shift coincides with a sharp increase in adoption benefits by some employers, including paid leave and reimbursement for costs.

Flexibility at work has always been essential for adoptive parents. In anticipation of a Chinese adoption in 2004, Jean Walker, a marketing manager, shifted to a new job with her employer, Verizon Communications in New York, that required less travel. She laid plans with her boss for a substitute to cover her three-month adoption leave.

Then, she waited — for the call that a child was ready for her in a Chinese orphanage. It came within weeks, triggering a new flurry of paperwork, planning and leave-taking, Walker says. That adoption took about a year.

More hurdles
But now, many of the most popular countries for U.S. adoptions, such as China, Russia, Ukraine and South Korea, are tightening restrictions or extending the waiting or processing periods. Continue reading

Financing Adoption: The Adoption Tax Credit

Taken from The Complete Adoption Book by Laura Beauvais-Godwin.

taxes“The adoption tax credit is perhaps the greatest financial incentive for adoptive families. You can now earn up to $10,160 in tax credit on your federal taxes for each child who you adopt. A tax credit is not the same as a tax deduction; a credit is far more generous.

“Qualified expenses include adoption fees, court costs, attorney’s fees, and other adoption-related expenses such as travel. For example, if you paid $15,000 in adoption expenses in 2005, the adoption was finalized that year, and you paid $5,000 in federal income tax for 2005, then when you file your 2005 taxes, you will receive a $5,000 refund. The following year, you can receive a refund up to the total amount you paid in taxes until you reach the tax credit total of $10, 160. If you adopt two children in one year, then you are eligible for a $20,320 tax credit”(p. 338).

How to Take a Credit Continue reading

Justin Taylor on Financing an Adoption

Justin Taylor writes:

One of the few posts that I repeat and supplement on this site is a list of resources that might help couples to finance an adoption. The reason is that adoptions are very expensive–often $15,000+ for a domestic adoption and $25,000+ for an international adoption; therefore finances are a major factor in preventing couples from adopting.

Here are some resources that may be of assistance: Continue reading