2011 Tax Credit
One of my readers brought this quote to my attention,”The National Council for Adoption, has publicized information regarding the Adoption Tax Credit. The following is an excerpt from their report: Beginning in 2011, parents will be eligible for a reduced tax credit of $6,000 per adopted child with special needs and ineligible for any tax credit for an adopted child without special needs. Please note that this does not occur until 2011 but we need to be aware.” I will do my best to explain what this means.
In 1996 a non-refundable tax credit for $6,000 was introduced to help defray the cost of adopting a child with special needs for adoptive parents. A $5,000 credit was introduced for adoptive parents adopting a non-special needs child. This credit is referred to as SBJPA. The $5,000 credit for adopting non- special needs children was to sunset on December 31, 2001. In 2001, Congress passed the EGTRRA bill (Economic Growth and Tax Relief Reconciliation Act) which increased both credits to $10,000 for all adoptions. It also raised the phase out income limit to $150,000 – $190,000 annual adjusted gross income. The 2001 EGTRRA bill will sunset on December 31, 2011. From what I understand, this means a few things:
1.Because the original SBJPA bill from 1996 concerning special needs adoptions and the $6,000 tax credit never expired, it will revert back to its original credit of $6,000 beginning in 2011. For those reporting more than $115,000 annual adjusted gross income they will not be allowed to claim the credit.
2. On December 31, 2001, the SBJPA $5,000 tax credit for adopting a non-special needs child expired. This means that there will not be a tax credit of any amount for adoptive parents adopting a non-special needs child beginning on December 31, 2010. The only credit available will be for parents adopting a child with special needs and the credit will be for $6,000.
3. If your adoption finalized before December 31, 2010, then you can continue to claim the tax credit on your taxes past 2011, because the bill was still in effect when your adoption finalized, with the understanding that you still qualify.
Click here to read the National Council of Adoption publication published in November 2008 concerning this topic. I hope this is helpful and if you have any questions, please ask me and I will do my best to find the answer.
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Do you know what qualifies as “special-need”?
[...] the status and the future of the Adoption Tax Credit. To read the history of the tax credit click here. The adoption tax credit is part of a reconciliation bill that has not yet been passed by the [...]
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Thank you for this. Can you please explain further? Im san adoptive parent of special needs children and I work as a consultant (1099). I wonder how this will work for me come tax time.
PS
Is that 6k credit refundable???
Sylvia,
The adoption tax credit is now fully refundable. I am not sure how this effects the adoption of a special needs child, but I ASSUME that it would be included. You can refer to the most recent post concerning how the credit changed in 2011 from being a credit to being fully refundable. As far as your taxes are concerned, I am not the person to ask, for I am not an adoption consultant nor an adoption lawyer. I am just a fellow adoptive parent. My inkling is that your job as a Consultant does not effect you being able to claim the adoption tax refund. You will have to provide evidence (receipts or proof of payment) in order to claim the refund. The maximum amount you can receive is around $13,000, even if your adoption exceeds that amount. So, I encourage you to keep researching and even write to your congressmen that you wish to reinstate this tax refund, as it is scheduled to sun set December 31, 2011. We have run into this the past two years and we are always urging this to become full term, and not something that has to be reconsidered each year. Obama reinstated it this year as well as made it fully refundable, it was supposed to retire on December 31, 2010. So, let’s keep it going! Write to your reps and congressmen and ask them to keep it going!
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