Refundable Adoption Tax Credit Nears Introduction
Bipartisan legislation that would make the federal adoption tax credit refundable for low- and moderate-income taxpayers is nearing introduction in the House and Senate.
Rep. Danny Davis (D-IL), who cosponsored similar legislation (HR 3031) last year, is expected to cosponsor the bill again in the coming days along with several Republican members of the House. Another bipartisan bill that would extend refundability for children adopted with special needs (HR 2510) has already been introduced in the House. In the Senate, Sen. Bob Casey (D-PA) is expected to reintroduce bipartisan legislation mirroring the Davis bill.
Under current law, the existing federal adoption tax credit offsets qualified adoption expenses up to $15,950 per adopted child (in 2023). Qualified expenses can include court fees, attorney fees, agency fees, travel costs, or other expenses necessary for the adoption. Unfortunately, because the credit is not refundable, families earning less than $30,000 do not earn enough to receive a tax benefit. Families earning more than that may receive a partial credit that only covers some of their expenses.
The federal adoption tax credit was temporarily refundable from 2010-2011, but the refundable portion expired when Congress failed to extend it. Lack of refundability has significant adverse effects on children adopted from foster care because many of the families who adopt foster children live at or near the poverty line.
Voice for Adoption has worked closely with the National Council For Adoption to collect organizational endorsements for the Davis and Casey bills. To date, over 100 national, state, and local organizations have done so.
Adoption advocates are cautiously optimistic that the legislation will be enacted in the current session of Congress. The legislation seemed on track to be included in an end-of-year tax package last year, but it was derailed at the last moment by an unrelated partisan disagreement.
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