WASHINGTON – The so-called “fiscal cliff” bill signed by President Obama didn’t fully please either political party, but it did contain great news for the adoption community by maintaining a tax credit that makes adoption more affordable for low- and middle-income families.
The adoption tax credit was set to expire at the end of the year, and for months the adoption community had been lobbying Congress to extend it. The House and Senate did even better than that, making the credit permanent under the bill passed just before the New Year, according to the office of Sen. Mary Landrieu (D.-La.), an adoption advocate. Unlike a tax deduction, which only reduces taxable income, a tax credit actually reduces a person’s tax liability. Last year the adoption tax credit was a maximum of $13,360.
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 $10,000 in federal taxes for a year, and their adoption cost $10,000, then they would owe no taxes for that one year, likely resulting in a large IRS refund. Families have up to five years to obtain the full credit.
Many adoptions, though, cost much more – $20,000 and up is common – and the tax credit simply makes an expensive adoption more affordable.
“Every child deserves a protective, loving family, and I hope that a permanent Adoption Tax Credit will enable many more families to open their hearts and homes to a child in need,” Landrieu said in a statement to Baptist Press. “Though making this credit a permanent part of our tax code is an important accomplishment, I will continue to work to improve the Adoption Tax Credit and to make it refundable to better assist Americans adopting out of the foster care system.”
Making the refund “permanent” would allow families to claim the credit beyond their tax liability, a move that would benefit lower-income families.
Bill J. Blacquiere, president of the Bethany Christian Services adoption agency, had been following progress on the issue for months.
“It came down to the last minute, but we’re thrilled Congress finally decided to extend the adoption tax credit,” Blacquiere told Baptist Press.
“While legislation is still being reviewed for final implementation, we’re also excited with the decision to make the adoption tax credit permanent. This will ease the minds of adoptive families across the country. We appreciate Congress’ continued support in trying to ensure that vulnerable children can experience the love of a forever family.”
Blacquiere previously had said he feared fewer families would adopt if the tax credit wasn’t renewed.
“I think there would be a lot of families who could not afford adoption,” he said in August. “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.”
(EDITOR’S NOTE – Michael Foust is associate editor of Baptist Press.)