Adoption, you don’t need a Tax Credit anymore!

Supermom and I were driving to the city the other day when she read an update on her phone from one of the adoption forums she keeps up with.  In it, it declared something that made us sad.  In december of 2010 the Adoption Tax Credit is set to phase out.  For those that are not familiar with what I am talking about, hang in there, I will explain.

The adoption tax credit allows families that have legitimate adoption expenses to take a credit on the year their adoption is finalized and for 4 subsequent years thereafter.  Now the tax credit has an income limit (which we aren’t even close to) and it is only a credit to the family that incurs expenses out of pocket, so excluding grants and scholarships from agencys.  Basically what the tax credit does is reduce the taxes you owe each year for up to 5 years or approx. $11,000/child whichever comes first.

For example, if you pay $20,000 for an adoption but you get $5000 from ABC grant company and you get a scholarship (grant) from your homestudy agency of $1000, then you can only claim $14000.  An adoption, for 1 child, that is finalized in 2009 will be eligible to get an approx. $11000 tax credit. (The credit is per child and I say approx. cause I don’t know the exact amount this year.)  So when you claim the $14000, the tax credit will only benefit you on the first ‘$11000′.

Great, but how does it work after that.  Well if you make $50K a year, then you are liable to pay the government ‘$X’ every year in taxes, right?!  So if that X is equal to $3k, then your taxes (not taxable income) will be reduced by $3k in year one, year two, and year three.  That gives you a total of $9K benefit over 3 years, right.  Then in year four you will only be able to take $2k in credit leaving you owing $1k in taxes.  This is just an example and your tax rate may be different but I hope you understand the math.

All that explanantion leads me to this,  It would be a big blow to adoption if our government saw it necessary to do away with the adoption tax credit.  For some families, this is what helped them move forward and answer the special call God placed on their hearts to be adoptive families.

I suspect however, that God will still bless those who care for the orphaned and the widowed, no matter what the US government does or doesn’t do!

(read the article that started this thought for me at

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