Adoption Tax Credit
Federal Adoption Tax Credit Information & Updates
Adoption Tax Credit Made Permanent, Not Refundable: See New FAQ—The bill to avert the fiscal cliff, which was signed on January 2, 2013, made the adoption tax credit permanent. The bill extended the adoption tax credit as it was in the 2001 Economic Growth and Tax Relief Reconciliation Act. The credit remains flat for special needs adoptions, which means that people who adopt children who are determined to be special needs (or hard to place) by a state or county child welfare agency can claim the maximum credit regardless of their expenses. The adoption credit is not refundable for 2012 and beyond, which means that only those individuals with tax liability will benefit. Advocates of the “Save the Adoption Tax Credit” campaign have created an FAQ to help answer common questions. Save the Adoption Tax Creditis the effort of a national collaboration of organizations and individuals called the Adoption Tax Credit Working Group that have united to support the cause of adoption by advocating for the adoption tax credit. Click here to download the new FAQ.
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VFA Helps Lead Efforts to Save the Adoption Tax Credit & Ensure Most Families Benefit—On December 14, 2012 VFA helped lead efforts to coordinate the Adoption Tax Credit Working Group (made up of 145 adoption organizations working to save the adoption tax credit) to write letters to Congress and the President about the extension of the adoption tax credit and inclusion of the refundable provision. The letters thank Congress for their support of the federal credit and encourage them to consider the importance of the refundable provision within an extension to ensure the majaority of children and families benefit.
Click here to read the letters sent to the President and leadership in the Senate and House.
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New Legislation Introduced to Extend the Adoption Tax Credit—On Tuesday, April 17th Representative Bruce Braley (D-Iowa) introduced the Making Adoption Affordable Act (H.R. 4373), a bill to renew and expand the federal adoption tax credit. The bill would make the adoption tax credit permanent and refundable. The bill would reinstate the amount to $13,360. It also includes an adjustment for inflation provision and if passed the law would be effective for taxable years beginning after Dec. 31, 2011. "Renewing and expanding the adoption tax credit will help remove a barrier to more families deciding to adopt. It’s a small investment that provides a big return: getting more children into loving homes and out of the costly foster care system. When a policy puts more kids in loving homes and also saves taxpayers millions of dollars in the process, expanding it should be a bipartisan no-brainer, ” said Representative Braley in a press release on his website.
Click here to read the full press release.
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Advocates Take National Stride to Save the Adoption Tax Credit—Save the Adoption Tax Credit is the effort of a national collaboration of organizations and individuals called the Adoption Tax Credit Working Group that have united to support the cause of adoption by advocating for the adoption tax credit. We know the adoption tax credit is an important resource to help children find forever families and make adoption affordable for all.
Under current law the adoption tax credit is not refundable for 2012 and the amount is $12,650. If no further action is taken by Congress to extend the credit, in 2013 it will sunset, and it will only benefit a very small number of families.
The goal for the future of the credit is:
- Inclusive: Children, whether adopted from foster care, through intercountry adoption, or through private domestic adoption should be able to benefit from the adoption tax credit.
- Permanent: The adoption tax credit should become a permanent part of the tax code to ensure continued support to those who bring children into families through adoption.
- Refundable: The adoption tax credit should be refundable to ensure that families with moderate and lower incomes receive the full benefit of the credit.
- Flat for Special Needs: All families who adopt a child with special needs should be eligible for a “flat” tax credit, meaning they can claim the maximum credit without documenting expenses. This distinction, which is already in current law, recognizes the fact that many of the expenses associated with adopting children with special needs show up after an adoption is finalized.
To learn more about this advocacy effort visit: http://adoptiontaxcredit.org/
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President’s FY 2013 Budget Includes a Proposal on the Adoption Tax Credit--The President’s Fiscal Year 2013 federal budget puts forth a proposal to make the adoption tax credit permanent and extend the provisions of the Affordable Care Act that make the credit refundable for 2012 and 2013. The refundable aspect is vital to some families, especially those who have a low tax liability. In the past families with little to no tax liability have not benefited from the credit the same as others. On February 28th a broad group of adoption organizations from all sectors of adoption—including foster care, international and private—joined together in thanking President Obama for his recent proposal to make the U.S. federal adoption tax credit permanent. There is broad support for ensuring that all families that adopt are able to benefit equally.
Click here to read the press release.
Click here to read the letter to the President.
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VFA Continues to Advocate for Foster Care Adoptive Families Around Access to the Adoption Tax Credit-- The Senate Finance Committee recently held a hearing on Extenders & Tax Reform. VFA submitted a statement for the record urging Congressional leaders of the Senate Finance Committee to examine how to continue making the credit accessible for all adoptive families, including those who do not have tax liability high enough to claim the credit. The credit was made refundable for 2010 and 2011, however it reverts back to a non-refundable credit in 2012. Click here to read the statement.
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Adoption Tax Credit Awareness Day, Feb. 13th, 2012-- Plan to take part. We are asking everyone in the adoption community to take part in the first grassroots Adoption Tax Credit Awareness Day, on Monday, Feb. 13th, 2012. Many adoptive families are not aware that this tax credit exists. It is our goal to help ensure that adoptive families who are eligible to receive this benefit are informed about how to claim the credit. We are asking everyone, including professionals, advocates, state agencies, families, and others to help spread the word on one given day (Feb. 13th) in hopes to broadcast the existence of the adoption tax credit. Click here to download an informational flier to distribute.
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2011 IRS Forms On IRS Website-- The IRS has released the 2011 form needed to claim the Federal Adoption Tax Credit, Form 8839. The IRS has also updated the instructions that accompany form 8839. Notably, the IRS has created a table (pg. 4 of the instructions) detailing what documentation is needed when filing for the credit, based on the type of the adoption. The IRS is also committed to updating the website regularly with future developments on the credit. Click here to visit the IRS website. Click here to view the list of necessary documents required by the IRS to claim the credit.
Help raise awareness about the availability of the adoption tax credit. Click here to download VFA's Adoption Tax Credit Postcard to share with eligible parents who may benefit from this credit.
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VFA Advocates to Make the Adoption Tax Credit Work for Families Adopting From Foster Care-- Voice for Adoption supports the adoption tax credit and has long advocated for the credit to be accessible by families adopting children from foster care. The adoption tax credit was made refundable in 2010. Before the credit was made refundable IRS data revealed that the vast majority (82 percent) of adoption tax credit recipients completed private or foreign adoptions rather than adoptions from foster care.
One of the significant barriers that prevent families who adopt foster children from receiving the benefits of the adoption tax credit is that these families tend to have lower incomes and therefore do not have enough of a tax liability to be able to claim the full value of the tax credit.
Voice for Adoption is calling on members of Congress to continue to make the adoption tax credit work better to promote adoptions of waiting foster children and support families who adopt children with special needs from foster care.
VFA believes that any extension of the adoption tax credit should ensure that the credit:
- Is effective at promoting and supporting adoptions of waiting children in foster care
- Is refundable so that it is actually beneficial for families who adopt children with special needs from foster care
- Accounts for the fact that many of the expenses associated with adopting from foster care show up after the adoption is finalized
Click here to download VFA's position paper on the adoption tax credit.
