Thursday, March 25, 2010

If you thought you couldn't afford to adopt...

You are now probably wrong.

That health bill that President Obama just signed? Well, it not only increased and extended the Adoption Tax Credit...it also changed it from a non-refundable credit to a REFUNDABLE credit.

Of $13,170 per child.

I am amazed. And so, so excited. Hoping and praying this paves the way for many more families to open their homes and hearts to a child in need.


19 comments:

geetabean said...

On average, how much does it cost to adopt internationally?

Cat said...

That's amazing! That covers a HUGE portion of the total amount, especially for some of the special-needs kiddos with reduced fees! :)

joy said...

Oh, Brianna, I had not heard this. This is amazing news!!! You might know more about this, but I also just heard that Ethiopia will require two trips now? Have you heard this also?

Joanie said...

Wow! That is huge. Definitely good news for those waiting for homes.

The Fearnsides said...

YAY! Thank you for posting this. As someone who wasn't a huge fan of this bill, it is nice to see that something good can come out of it. ;)

Keith and I had seriosuly considered adopting a SN's girl from Russia a few years ago. Even with reduced fees, it was totally unaffordable. I pray that this will open the door for more children to have the opportunity to grow up in a family!

Makes me want to adopt ASAP!

Julie said...

I am so happy to hear this. I had hoped it was coming.

Julie

p.s. We adopted two children at once and the cost was a little over $25,000. This new credit would totally cover that! Awesome!

Jeannett said...

okay, i'm not very smart. what does that mean? how is that different (can you tell we pay someone to do our taxes???!!!)

Brianna Heldt said...

geetabean, the cost of international adoption varies widely. I'd say on average, it is $10,000-$30,000, and depends on which country you adopt from.

Joy, no, Ethiopia is NOT requiring two trips now. (Thank goodness!)That has been put off indefinitely, according to the courts.

Monica, ha, I'm with you. Wasn't a huge fan either. But this is a blessing to be sure.

Jeannett, the way it was before, you got roughly $12,000 per child as a tax credit with a five year limit. SO you had five years to apply $12,000 to what you owed in taxes. NOW though, you get $13,000 in a tax REFUND. A check from the government for $13,000. WOW!

Sarah Griffin said...

when does this go into effect? could someone that already adopted this year (feb 2010) benefit from this, or is it only on new adoptions after the date he signed the bill?

Kevin Heldt said...

Ha, Jeannett, that's awesome. I'll explain. Formerly, the adoption tax credit was a non-refundable credit which means it could be used to bring your tax liability (what you owe) down to $0 but nothing else. There was also a carryover provision that allowed you to carryover any unused portion for up to 5 years. So in the case of Julie (above), she would have had 5 years (technically 6 different 1040s as it plays out) to recover as much of her $25k as possible. Though earlier the credit was less so she would have been limited by the total credit amount as opposed to her actual expenses. The problem for many families like ours though is that our tax liability is already so low (single income, own a home, lots of kids) that 5 years wasn't long enough to recover the credit amount. So in that sense, the adoption tax credit law favored people who make a lot of money relative to their family size: only those folks could take full advantage. Well, now in addition to raising the credit amount by another $1k (the amount has increased a few times over the last few years so that part isn't super groundbreaking), it is being changed to a refundable credit which means that you can receive a refund for any unused portion. That's a HUGE difference. So for a family with an average of $3k per year in federal tax liability and an adoption costing $25k for two children, whereas before the family would be able to recover $3k per year for those 6 years, essentially forfeiting $7k of their adoption tax credit at the end (25-3*6=7), now that family would get a refund of $22k that first year they are able to claim the credit. And I just read the text of the bill and it does seem to be saying what people are saying it says.

Kevin Heldt said...

Wow, guess I was too slow! :)

Sarah, the language says:

(d) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2009.

So I understand that to mean that it will apply to any adoption finalized (according to the IRS' definitions for finalization) in 2010 and forward. So you should be good!

Jeannett said...

okay, wow! that IS amazing! rad!

I am Katy, said...

Very cool!

excitedtobeafamily said...

This is an answer to many prayers but my husband said it is to expire Dec. 31, 2011. Can you post a link? We are adopting from Thailand and should be getting our referral in 2011 but the adoption isn't finalized until, at the earliest, 6 months after we come home. I wonder if it will be too late for us? Very exciting news even though I was very against this bill. Thanks for posting!

Kevin Heldt said...

You can read the full text here -- pertinent section is at the very end (Sec. 10909 starting on p. 903):

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h3590enr.txt.pdf

As for the 12/31/11 expiration date, that is a one-year extension as the Economic Growth and Tax Relief Reconciliation Act of 2001 (which provided the increase, adjusted for inflation, for the credit above the then-$5,000) was set to expire at the end of this year (12/31/10). There have been bills to "repeal the sunset", but none of them have gone through, but I'm not sure I'd be too concerned about them letting it drop. The adoption related legislation in this bill seems (to me) to prove that Congress is aware of the sunset and in support of not allowing it to occur so I would hope, at worst, they would keep renewing it in a yearly fashion if not eventually repealing the sunset entirely. (If the sunset occurs, the credit would drop back to the $5,000 ($6,000 for special needs) level.) But clearly, trying to get your adoption finalized before 12/31/11, if at all possible, would be the best case scenario for peace of mind.

Emily said...

AMAZING answer to prayer!!! Thanks so much for this info. :)

excitedtobeafamily said...

Thank you!

BeckyandTroy said...

Since we are talking about tax benefits. There is a really cool tax benefit on the books right now that encourages adopting special needs children. It allows families adopting "special needs" children to take the full deduction amount whether or not there were any adoption expenses. This favors domestic adoption (specifically adoption out of foster care....since it is essentially free) but I thought I would throw it out there.

By the way "Special needs" in this case encompasses a spectrum of kids (hard-to-place kids, medical issues, older kids, etc.). A good summary of this benefit is here:
http://www.nacac.org/postadopt/taxcredit.html

Troy

Kevin Heldt said...

Yeah, Troy, I think that's great too. But, yeah, it is only for children who are US citizens. For the first "special needs" test, the IRS language reads: "The child was a citizen or resident of the United States or its possessions at the time the adoption process began." But yeah, that will especially be powerful for families adopting domestically now that the credit is refundable.

 

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