How the adoption tax credit works
Author: Christina Pomoni
The decision to adopt is one of the most exciting moments in one’s life. Yet, financing an adoption is an overwhelming stress for most adoptive families. The costs involved in the adoption process can be devastating, and prospective adoptive parents may get discouraged.
The Adoption Tax Credit is one of the valuable funding options available to prospective adoptive families, but also one of the most intricate tax law provisions. Received by the Internal Revenue Service (IRS), the Adoption Tax Credit asserts that the adoption expenses are subtracted against the yearly tax liability. However, adoptive families need to learn what the tax credit covers, what the directly related adoption expenses are, who qualifies, and how the provision works.
The tax credit is applicable both to domestic and international adoptions. For a domestic adoption, adoptive families can claim the credit regardless if the adoption process is not finalized. Instead, for an international adoption, adoptive families cannot apply for the credit until the adoption process is finalized. In case the adoption process of an international adoption is interrupted, families may claim the adoption expenses to the maximum amount that may be credited on a second adoption.
Eligibility requirements of the adoption tax credit require that adoptive families have adopted an eligible child and that they have paid qualified expenses on their own. The tax credit defines as eligible any child younger than 17 or any child who is US citizen, or resident alien, mentally and physically incapable of taking care of oneself.
If the adopted child is a US citizen or resident alien, adoptive parents collect the credit for qualified expenses based on when the adoption was finalized. For example, for expenses paid before the adoption is finalized, tax credit is collected the next year; for expenses paid the same year that the adoption is finalized, tax credit is collected the same year; for expenses paid after the adoption is finalized, tax credit is paid the year the expenses are made.
If the adopted child is a foreigner, adoptive parents collect the credit for qualified expenses the same year that the adoption is finalized. Also, for any expenses made after the finalization of the adoption, adoptive families are eligible for collecting tax credit the same year that they made the expenses.
The IRS (Publication 968) defines as directly related adoption expenses the adoption fees, legal fees, transportation fees, meals, and accommodation expenses provided they are all “reasonable and necessary." Prospective adoptive parents should revise the IRS guidelines very carefully with a tax expert so that they are sure about the expenses they are eligible to claim. For example, expenses related to surrogate families are not included in the qualified expenses for the tax credit. Also, expenses that are already reimbursed by private programs such as employee benefits are not qualified either.
Currently, the States of Arizona, California, Idaho, Iowa, Kansas, Maryland, Massachusetts, Michigan, Missouri, New Mexico, North Dakota, Oklahoma, Utah, West Virginia and Wisconsin exercise the Adoption Tax Credit providing a full credit of $12,150 for offsetting adoption expenses. Adoptive families that have been reimbursed by the tax credit provision consider that is more valuable than plain tax reduction because qualified adoption expenses are subtracted on a dollar to dollar basis. Hence, if someone has a tax liability of $8,000 and has incurred adoption expenses of $5,000, tax liability will be reduced to $3,000. In case the tax liability is lesser amount than the tax credit, the difference is carried forward for up to five years.
Generally, prospective adoptive parents should consult tax experts in order to clarify their eligibility, to investigate if their State offers the Adoption Tax Credit, and overall, to ensure that all their claims are appropriately filed.
Article Source: http://www.articlesbase.com/parenting-articles/how-the-adoption-tax-credit-works-895938.html
About the Author:
I work as a financial and investment advisor but my passion is writing, music and photography. Writing mostly about finance, business and music, being an amateur photographer and a professional dj, I am inspired from life.
Being a strong advocate of simplicity in life, I love my family, my partner and all the people that have stood by me with or without knowing. And I hope that someday, human nature will cease to be greedy and demanding realizing that the more we have the more we want and the more we satisfy our needs the more needs we create. And this is so needless after all.
Adoption Agencies – Choosing The Best One!
Adoption is a wonderful way to bring a child into a loving home, whether it is a home where a mother and father are having trouble conceiving, or a home that is ready to add to their existing brood. Whatever situation you find yourself in, if you are considering adoption, then the first step is choosing an adoption agency. While this might not seem that crucial, it is. Without a quality adoption agency with your best interests at heart, your journey to become adoptive parents can be paved with heartache and disappointment.
One form of adoption agency that you want to avoid is those agencies that recruit birth mothers. These adoption agencies tend to be in the business for the bottom line, the money they will make from arranging an adoption. While they are not going to place children in compromising situations, for legal reasons, they are not considerably concerned about creating a loving family environment. If they get paid and operate within the law, they are happy.
You can recognize these agencies if you know what to look for. One red flag is an agency that tends to recruit their birth mothers aggressively. They may advertise their facilities, as a place for women to stay that is luxurious and comfortable. The problem with this is that the women often feel that they owe the agency something for this comfort and do not feel free to change their mind after the birth about the adoption.
Another red flag that you want to avoid when choosing your adoption agency is one that does not provide education and support for those families who have adopted. Again, this shows a lack of concern for the adoptive family. These poor companies will advertise adoption as being all positive. They ignore the negative emotional consequences that many birth mothers go through. While adoption is a beautiful event, there are many complicated emotional issues surrounding the process. A quality adoption agency will consider and educate about these concerns.
You know you have found a good adoption agency if you find one that treats their birth mothers well. They will make sure that these women are completely aware of what they are doing in surrendering their children and completely educated them about their legal rights, including the time they have that they can change their mind.
A good agency will be open from the beginning of the process about the intricate emotions and other aspects of the adoption process. Because of this, they do not pamper the birth mothers, but encourage them to support themselves. This helps them cope with the emotions they face when placing their children for adoption.
The benefit of using a quality adoption agency is that the adoptions usually stick. Remember that women have a waiting period where a birth mother can choose to change her mind about the adoption. If the birth moms are not fully educated about the process of adoption, this leads to heartbreak for the adoptive parents, when the mom decides to change her mind at the last minute. Using a quality adoption agency will keep this fail rate low!
Michael Russell
Your Independent guide to Adoption
Article Source: http://EzineArticles.com/?expert=Michael_Russell
http://EzineArticles.com/?Adoption-Agencies---Choosing-The-Best-One!&id=446027
Child Adoption
There are varying laws and jurisdictions regarding adoption. A closed adoption prevents contact between the biological parents and the adopted person. An open adoption allows varying degrees of contact however, they are not legally enforceable and may be closed at any time.
If a child's parents are no longer able to adequately care for them or single motherhood is considered unacceptable, as is the case in some countries, then plans for adoption are made. Children are also abandoned near an orphanage in order to be adopted. Some parents involuntarily lose their rights because of child abuse or neglect due to alcohol or drug abuse. The child is then placed in foster care. If the parents cannot resolve the problems, their parental rights may be terminated by the court and the children may be adopted. Death of the parents accounts for only a small percentage of orphaned adoptions.
For neglected of abused children, adoption can ensure an opportunity to bond with a new family. In the past, these children were kept in foster care while the birthparents resolved their issues with addiction, domestic violence, or mental illness. The Safe Families Act of 1997 is a law that prevents children from drifting from one foster home to another.
When applying to adopt, the potential parents may be required to be interviewed and undergo financial, medical, and criminal record checks. This can be carried out by either the adoption agency or by an independent or state authority.
Many parents look to adopt infants more often than toddlers or older children. They also seek children of the same race. So agencies, as a result, seek families who are interested in older children and those with special needs.
The cost to adopt varies between countries. Adoption charges are illegal in some countries while in others, the adoption must be paid on a non-profit basis. Financial assistance is offered by many adoption programs. International adoptions include additional costs such as travel expenses and legal document translation fees.
However, the increase in legalized abortions and single parenthood has reduced the number of available children for adoption in the Western nations.
Many parents and adopted people have the desire to reunite. This has led to the opening of sealed records in countries where adoption is confidential. For example, in the US, organizations such as the Adoption Reunion Registry allows adopted children to access their sealed records.
There are variations in the traditional adoption methods. In Arab cultures, an adopted child is considered a ward of the household. The child does not receive the adopting parent's family name.
In Korea, adoption takes place when another family member gives a male child to the first-born male heir of the family. In Asian societies, traditional Western adoptions occurring outside the family are rare. However, in Africa, the regular exchange of children among families is common. This form of adoption is meant to create an enduring social structure among families and lineages.
Michael Russell
Your Independent guide to Adoption
Article Source: http://EzineArticles.com/?expert=Michael_Russell
http://EzineArticles.com/?Child-Adoption&id=225068