[jeffw]

I just received a newsletter from the NACAC forwarded to me by my Post Adopt coordinator. I thought others might be interested.

Adoption Tax Credit Is Now Refundable

The health care reform bill made the federal adoption tax credit refundable as of 2010—meaning adoptive families can benefit from the credit even if they do not have tax liability. This change makes the credit much more accessible to lower and moderate income families. Last week the IRS released guidance stating that adoption tax credit amounts carried forward from previous years are also refundable, so even parents who adopted as long ago as 2005 can benefit from the new law. If parents claimed the credit on their tax return for adoptions from 2005 to 2009 and have been carrying it forward on each return, with their 2010 taxes they can be paid for any remaining amount of the credit that they have not yet received. Parents who didn't file for the credit originally will need to amend past tax returns. (Look for more information on NACAC web site soon. We'll include links in a future News from NACAC.)

If you have questions, contact us at adoption.assistance@nacac.org.

I can't find this article on the NACAC website, but I did find the relevant information on the IRS website: here

Personally, I have about $21K of carry over from a 2009 adoption of 2 special needs foster kids. It appears that I can get all of that on my next refund. The skeptic in me is finding this impossibly hard to believe but I can't find any reason why it isn't so.

[txwannabemom]

I emailed the address above today with the question: really someone will give me that much money? (please say yes please say yes!) heres the reply:

Do you get a subsidy for your daughter?

If yes, then you claim the credit (form 8839) on your 2009 returns.

For 2009 (assuming you extended your deadline to October 15) you can only use as much of the credit as you have in tax liability (and maybe less if you have other credits). Any amount that you carryforward to 2010, you will be able to use as a refundable credit in 2010.

So lets say you adopted one child in 2009 with subsidy, then you can claim $12,150 in adoption tax credit. Now if your tax liability is only $2000 (line 46 of Form 1040), and you have no other credits, then you would use $2000 of the adoption tax credit, and carryforward $10,150 to 2010. In 2010 you would be able to use the remaining $10,150 regardless of your tax liability because it is now a refundable credit.


So I have emailed back to say...Does that mean in 2010 I get 10,150 minus my 2010 tax liability? (cause that will still be alot of dollars!) (please say yes please say yes!)

Where is DianeS? Diane! We need you!

[DianeS]

Hello!

You're making it complicated. It isn't, not anymore.

Do you know the amount of the credit that you carried over from last year? THAT is the amount you will get back - completely get back, no strings attached - when you do your 2010 taxes.

See? Simple.

(If you owe the IRS some taxes because you did not pay them ahead of time via paycheck deductions, then you can use some of your refund to pay that first. But if you don't owe any taxes, then you get a lump sum check for the amount you carry over from last year.)

[athikers]

Sweet. This is making our month long vacation in February seem somewhat less "taxing"

[txwannabemom]

Diane that was FAST!

I think I am making it complicated because it sounds TOO GOOD TO BE TRUE!!

[o2b30again]

Hubby said the same thing "I'll believe it when I cash the check!"

[Linny]

Ohhh, I'll breathe better when I have the check in my account too....but here's another link as well......and this one came from another adoption site I belong to---and was sent by the NACAC to one of the members:

http://www.irs.gov/pub/irs-drop/n-10-66.pdf

We 'lost' the $$ we paid for two of our adoptions because---even carried forward----we didn't need to use them (too many deductions already). However, we now have two more adoptions that have been carried forward which, I think would amount to around $20K. Sure would be nice...and according to this link, that money WILL be refunded.....but again, I'll breathe better when I see it.

Sincerely,

Linny

[megaphonemo]

We always did ours this way - that is what the folks at H&R square told us we could do... And we always took their peace of mind guarantee in case they were wrong... It is awesome. Bet a bunch of folks are wishing they could file their taxes NOW!!

Mega

[chloroxsis]

Cool! This is a bit of good news on a day when I'm feeling grumpy!

[naca]

From the second link listed I noticed this under documentation ::

d. Information to be included in documentation
An order or decree must include information that establishes that the taxpayer’s adoption of the eligible child has been finalized and the date finalized, and a special needs determination must include information that establishes that the state has made a determination of special needs for the eligible child. A taxpayer may redact sensitive personal information from an adoption order or decree or a special needs determination.
However, the Internal Revenue Service may require the taxpayer to provide an unredacted copy of the document if needed to substantiate the claim for the credit.

Sooo does that mean that we have to have something in our adoption form actually stating that the child is a special needs child? We are adopting 3 this year (and have one previous that is still carrying over)- I don't recall seeing anything in the actual adoption paperwork saying they were "special needs" yet they all receive subsidy (or will).

[lovinlifex6]

NACA, Hopefully someone else who knows for sure will chime in but we were told that a child receiving a subsidy qualifies as special needs and the proof of subsidy is all we need to show for tax purposes. Again, I am not 100% on that, just what we were told.

[naca]

How do we prove subsidy? All of ours is automatically deposited with no 'check stub'.. I think with my boys (adopting next month) I'll be able to show my subsidy approval from the state but I have no such form from my AD (adopted from Tx in April)...

[chloroxsis]

Originally Posted by naca

From the second link listed I noticed this under documentation ::

d. Information to be included in documentation
An order or decree must include information that establishes that the taxpayer’s adoption of the eligible child has been finalized and the date finalized, and a special needs determination must include information that establishes that the state has made a determination of special needs for the eligible child. A taxpayer may redact sensitive personal information from an adoption order or decree or a special needs determination.
However, the Internal Revenue Service may require the taxpayer to provide an unredacted copy of the document if needed to substantiate the claim for the credit.

Sooo does that mean that we have to have something in our adoption form actually stating that the child is a special needs child? We are adopting 3 this year (and have one previous that is still carrying over)- I don't recall seeing anything in the actual adoption paperwork saying they were "special needs" yet they all receive subsidy (or will).

I did get somethng from the state when my DD was placed, and it showed she was special needs. The worker told me I'd need that for the tax credit along with the adoption decree. I got mine from the subsidy worker, but it's possible you will get yours with the adoption decree.

Good luck!

[singingmama]

does anyone know if for sure the adoption tax credit is going to carry through 2011. Our adoption will be in 2011 and have heard conflicting information on the tax credit and whether it was extended. thanks,

[DianeS]

Originally Posted by singingmama

does anyone know if for sure the adoption tax credit is going to carry through 2011. Our adoption will be in 2011 and have heard conflicting information on the tax credit and whether it was extended. thanks,

The current law extends the federal adoption tax credit through the end of 2011. The extension (and making it refundable) was tacked on to the end of the health care bill.