[Archive]

I am getting lots of calls from people who have previously adopted and are receiving AAP for the child. Can they claim the child as a deduction? It is my understanding that if a family claims the child as a deduction, then they must claim the AAP and /or county or state subsidies as income. If you question this, then check with your accountant.

[Archive]

Originally Posted By Linda

We talked to our tax preparer about this. Yes, we could claim our child as a deduction and No we didn't have to divulge the subsidy. The subsidy is for the child..not the parents. Therefore it is not income. And because, as everyone knows, you spend alot more money on the child than the subsidy provides you can claim the child as a dependent. This is just what we have done and we were told that it was ok. We also were told that we couldn't or shouldn't put the subsidy down when applying for loans. Then on the other hand you will run into complete ignorance in the courts as we did when I was sueing my husband for child support. He wanted half of the subsidy monies. Since the judge had never heard of anything like this and this was a rural county he decided to make the judgement on his own without looking into adoption laws and process regarding subsidy. I had letters from the county she was adopted from stating that this was not and income and was solely for the childs benefit. My child was EXTREMELY destructive at the time and I had to repair broken windows, sliced up linoleum floors, drywall, etc. And I had the pictures to prove it. He still ruled in my husband's favor stating that he had a right to have that counted as my income. So he counted 1/2 of the subsidy as income. And my husband NEVER sees my daughter and wants nothing to do with her. Have you ever heard of anything like this. I would be curious to know if there were any judgements made in any other courts out of ignorance to the adoption laws and subsidies. Thanks

[Archive]

This is interesting. The directive about claiming the child and counting the AAP and sibsidy came out in a state directive. I wonder if the IRS is together on this!

[Archive]

Hopefully if I was wrong the tax preparer will back me on this. We have done this for a while now. And believe me, we asked alot of questions. My taxes are simple to do but I don't do them myself for the simple fact that I will have someone who is supposed to know what they are doing behind me.

[Archive]

Originally Posted By Family with 4 Wonderful Adopted Kids

I'd recommend that you look at the following home page:
http:/members.aol.com/nacac/taxes.html

It was prepared by the North American Council on Adoptable Children. It discusses things like meeting the greater than 50% support rule which can be affected by adoption subsidies and the time of placement of the child (i.e., time of the year). We took placement of 2 children during the tax year 1999 but did not claim them as a deduction on our 1999 taxes due to the amount of time they were here along with the amount of subsidy. We did not feel that we meant the 50% support rule. It is not the same as a child born biologically to you where December 31 is as good as January 1.

There are several publications noted in the above homepage that we have read in detail (they can be downloaded from the IRS site and you can review them in the Adobe format). The IRS does a pretty good job discussing how to handle the deduction of foster child but is relatively silent on adoptive children. You have to use the guidance provided for foster children for adoptive children except that they do not have to be with you the entire calendar year as foster children have to.

[Archive]

Thanks to you all for posts on this subject. The feds LOVE adoption. You get this amazing tax credit, spread over five years if you like - AND great treatment of your subsidy. I am not a tax expert or an attorney (no kidding) - but....the NACAC site is a good resource - also my agency's main site has a page on finances with links to the IRS sources. It's
http:www.futurefamilies.org/master.html (which bypasses the splash page).