NASHVILLE With Congress embroiled in debate over the so-called fiscal cliff, many in the adoption community are concerned the adoption tax credit set to expire at year's end could be forgotten, even though immediate action is needed.
The tax credit that provided last year a maximum of $13,360 to each adoptive family has helped countless low- and middle-income families afford the costly endeavor. Unlike a tax deduction, which only reduces taxable income, a tax credit actually reduces a person's tax liability.
U.S. Sen. Mary Landrieu, D.-La., introduced in September the Making Adoption Affordable Act, which would permanently establish the tax credit and make it "refundable," allowing adoptive families to receive a refund "in excess of their tax liability," according to a release from the senator's office. The bill is HB 4373 in the House and SB 3616 in the Senate.
"Throughout this year we've always been told by the legislators that this bill would be taken up after the election," said Bill J. Blacquiere, president of nationwide adoption agency Bethany Christian Services. "Well, now it is after the election ..."
Blacquiere remains optimistic the adoption tax credit will be extended by year's end but also acknowledges "with all the debate going on regarding the fiscal cliff, [the adoption tax credit bill] has sort of been stalled in that process."
Under Internal Revenue Service rules, an adoptive family can claim adoption expenses court costs and adoption agency fees, among others up to the maximum amount allowed under the credit. This means if an adoptive family owes $13,000 in federal taxes, for instance, and their adoption costs $13,000, they would owe no taxes that year, likely resulting in a large IRS refund. Landrieu's bill would provide up to $13,170 for covered adoption expenses, adjusted for inflation. She is the parent of two adopted children.
"The costs associated with adoption can quickly grow, particularly when a child has special needs, and this credit helps families who otherwise might not be able to afford it maintain their economic security as they begin raising their children," Landrieu said in September.
Blacquiere fears that without the tax credit, there will be fewer adoptions.
"People would just simply say, 'I can't afford this cost,' and they would back out of it," Blacquiere said.
The 2007 National Survey of Adoptive Parents showed that only one-fourth of those who adopt children from foster care have incomes greater than $87,000, according to Kathleen Strottman, executive director of the Congressional Coalition on Adoption Institute. Strottman quoted the statistic in a Washington Times article.
The government has an interest in supporting adoptions through the tax credit, Blacquiere added.
"We in the United States have about 114,000 children that are in foster care, are permanent wards of the state meaning they have no parents and are waiting to be adopted," Blacquiere said. "And there are many families who are willing to adopt these children but do not have the financial resources to do so. The adoption tax credit empowers them to adopt these children. To get these children adopted, we need the adoption tax credit. The government is paying foster care costs for these children while they're waiting for a home. And if they get into an adoptive home, those costs get reduced to the government."