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Adoption tax credit running out

By Kay Bell ·
Tuesday, May 8, 2012
Posted: 5 pm ET

Families are formed in many ways. One of the most expensive methods is through adoption.

Any adoptive parent will tell you that the price of the process was well worth it. But these moms and dads also are happy that the tax code provides some help via the adoption tax credit.

But federal assistance in covering adoption costs is dwindling. In 2012 this tax credit dropped to $12,650. That's still a lot of money that goes toward a dollar-for-dollar reduction of your tax bill. But it's $710 less than the credit amount available for the 2011 tax year.

More painful, the current adoption tax credit is no longer refundable. That means it can help zero out your tax bill, but you won't get any excess credit back as a tax refund.

And the tax news gets worse for prospective adoptive parents. Unless Congress acts to extend this tax credit, on Jan. 1, 2013, the there will be no adoption tax credit except for special needs children who are adopted within the United States.

Considering that costs for adoption can quickly climb into the mid-five figures, the adoption tax credit could make a difference in future parents' financial family planning.

Do I expect the adoption credit to go away completely? No. Every politician wants to be seen as family-friendly.

But will it be as generous as it was in 2010, 2011 or even 2012? Possibly not.

President Barack Obama's fiscal year 2013 budget includes a proposal to make the adoption tax credit permanent and make it refundable for 2012 retroactively and for 2013.

Congress, however, is fixated on the federal deficit and is constantly looking to squeeze every cent it can out of federal subsidies. And this tax credit is essentially a federal subsidy for families.

Plus, with Congress and the president famously at odds, there is likely a contingent that will oppose this Obama-supported proposal even if they support it.

So if you're in the process of adopting, I suggest you do everything you can to wrap it up in 2012. That way you know for sure what amount of tax credit you'll be able to claim.

And more importantly, you'll have your new son or daughter at home sooner!

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July 02, 2012 at 3:39 pm

Does anyone know how we can find up to date information on if this will be extended into 2013?

Thank you!

June 22, 2012 at 6:31 pm

So where can we get answers about the adoption tax credit. Is there a shoreline or website we can check frequently?

...thanks, Mar :)

June 22, 2012 at 6:30 pm

So where can we get answers about the adoption tax credit. Is there a shoreline or website we can check frequently?

June 20, 2012 at 7:09 pm

While private adoption is expensive, please do not promote the false idea that adoption itself is expensive. Adoption through the state is often free, and in some states the family adopting through the state gets additional supports (insurance, subsidies, support services, clothing, etc.) covered regardless of the family's income.

Adoption is only expensive for families who will only consider a white newborn with completely known family history.

But yes, the credit should be continued to encourage all types of adoption.

June 20, 2012 at 3:31 am

The $12,650 credit for 2012 tax year is on the IRS site. Pull up the Publication 505 (Revised Jan. 2012) and look at page 2 where it talks about how this credit decreased to $12,650 for 2012, as is not refundable in 2012. HTH

June 10, 2012 at 3:55 pm

My wife and I are thinking about adoption but the expenses to do so are extremely high ($30,000, plus). I hope that the existing adoption tax credit will remain so that we can bring home a child in need, create our family, and not become overly cash poor in the process.

June 07, 2012 at 2:49 pm

Where do you get the information about $12,650 in 2012? Why isn't it anywhere on the IRS site?