[mamasoon]

I have a question about tax returns regarding adoption or fostering. If our adoption is final before the end of the year, do we claim the children as dependants? If the adoption is not final do we get any sort of deduction for being foster parents? We do get subsidy but of course that only pays for so much. That dosent pay for toiletries, diapers, wipes, shoes, toys, yadda yadda yadda. thanks,
Kathy

[mckenna]

if the adoption are finalized prior to dec 31, you claim them as dependants. there is also an adoption tax credit you can claim if your state has classified your children as special needs. in mo, all foster children are considered special needs.

i have heard two different things about foster children

my accountant stated if the chid was in your home for one calander year (meaning 1/1-12/31) you may claim them as a dependant, if not, then you cannot claim them as a dependant.

others have said that it only has to be 6 months. i would check with your accountant (if you use one).

[SheldeMuse]

Here are some details on the adoption tax credit:

Special Rule for Adopting a Child With Special Needs
Beginning in 2003, the maximum credit and exclusion, subject to the income and tax liability limits discussed earlier, will be allowed for the adoption of a child with special needs even if you do not have any qualifying expenses. For 2003, the maximum amount for each is $10,160.

Child with special needs: An eligible child is a child with special needs if he or she is a citizen or resident of the United States (including U.S. possessions) and a state determines that the child cannot or should not be returned to his or her parents' home and probably will not be adopted unless adoption assistance is provided to the adoptive parents. Factors used by states to determine if a child has special needs could include:




The child's ethnic background,

The child's age,

Whether the child is a member of a minority or sibling group, or

Whether the child has a medical condition or physical, mental, or emotional handicap.


If your state has determined that the child you are adopting is a child with special needs, you should keep evidence of that fact for your records.

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So there is a little something to help us offset the expense of taking lots of time off work. Here are web links to the information:

http://tax-credit.adoption.com/
http://www.irs.gov/pub/irs-pdf/p968.pdf

The first link has an article that says this tax credit is complicated... don't let that throw you. For those of us doing special needs adoption with low or no costs, it seems pretty darn simple! Just be sure to hang on to the information, in case your tax preparer (or Quicken!) isn't aware of the provision for special needs adoption.