NASHVILLE, Tenn. – A substantial tax credit that couples or individuals receive when they adopt is set to expire at year’s end unless Congress acts, and experts fear that without it fewer families will adopt.
At issue is the adoption tax credit – last year it was a maximum of $13,360 – that allows low- and middle-income families who otherwise couldn’t afford it to adopt. Unlike a tax deduction, which only reduces taxable income, a tax credit actually reduces a person’s tax liability.
Under IRS 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 for instance, that if an adoptive family owes $13,000 in federal taxes for a year, and their adoption cost $13,000, then they would owe no taxes for that one year, likely resulting in a large IRS refund.
Many adoptions, though, cost much more – $20,000 and up is common – and the tax credit simply makes an expensive adoption more affordable.
“We are not rich. We are very middle-income, and we have scraped and saved and done everything humanly possible to bring these girls home,” Julie Redden of Houston, who along with her husband, Brett, adopted one girl from China and are trying to adopt another one, told Reuters.
The tax credit has been a huge boost to the adoptive community but has yet to be renewed by Congress, even though many on both sides of the political aisle – including President Obama – want to see it continued and even be made permanent. One fear is the tax credit could be a byproduct of Washington gridlock – not to mention a congressional desire to cut the budget.
The tax credit has been in danger previously, but this year the adoption community is particularly worried.
“I would say we are very concerned,” Bill J. Blacquiere, president of Bethany Christian Services, a nationwide adoption agency, told Baptist Press. “We are hearing from people on the inside [in D.C.], this may not pass this year.”
Congress, Blacquiere, said, should not view the adoption tax credit as something that costs the federal government money but instead as something that saves it money. That is because, he said, the adoption process – in the long run – prevents children from growing up without a family.
“Children without families, who grow up in foster care … the statistics show that probably 50 percent of those children end up in our adult prison systems,” Blacquiere said.
CBS News in April quoted a study that showed the average yearly cost of incarcerating one inmate was $31,000. In some states, it was as high as $50,000 to $60,000.
“And that’s just for one year. When you place children with families, you’re preventing incarceration, you’re preventing drug use – which could hurt society by crimes committed or drug rehabilitation. I think investing $13,000 in a child, you are preventing a lot of serious costs to society on a future basis.”
Bethany lists the average cost of its domestic infant adoption fees at $18,000. But the true cost to the agency is around $26,000, meaning Bethany already is subsidizing adoption costs, Blacquiere said. Adoption agencies, he said, cannot simply lower their fees to make up for the elimination of the tax credit.
Eliminating the tax credit, he believes, would result in fewer families adopting.
“I think there would be a lot of families who could not afford adoption,” he said. “Even now, with the adoption tax credit, there [are] families who are taking out loans. They are doing second mortgages. You take away the credit, and they probably couldn’t even get the loans.”
A stand-alone bill (H.R. 4373) to make the adoption tax credit permanent was introduced this year by Rep. Bruce Braley, D.-Iowa, and has 18 co-sponsors. Some, though, believe a stand-alone will make little progress in Congress and that the tax credit – if Congress supports it – will have to be extended through passage of a larger tax bill.
(EDITOR’S NOTE – Michael Foust is associate editor of Baptist Press.)