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Tax Tips for Adoptive Parents

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Thursday, March 22, 2012   

LANSING, Mich. - When the Affordable Care Act became law, it didn't just affect health care; it also changed what adoptive parents can claim on their taxes. Namely, the tax credit for adoption-related expenses went from being nonrefundable to refundable.

Accountant Jeremy Rospierski with Lutheran Social Services of Michigan is a tax preparer and an adoptive parent. He says that in the past, that meant the credit could only be used to offset any taxes you owed, with any extra rolled into the following year. But now, he says, the change means adoptive parents will get cash back - even if they don't owe anything.

"A refundable credit means that you can get the entire credit in the year that you file your Adoption Credit."

Under U.S. tax law, qualified expenses include adoption fees, court costs, attorney fees and travel expenses. Rospierski says that unused credits from the past five years can be carried forward, so parents who did not receive the full credit in the past can file an amendment for expenses going back to 2005.

The maximum amount adoptive parents can claim per child for 2011 is $13,360. Rospierski says parents who have adopted a special needs child are eligible to claim the maximum credit. He stresses that the definition of "special needs" is broader than many parents might be aware and is based on three criteria.

"One, the child is a U.S. citizen. The second qualification is that it's determined that the child will not return to the parents' home, which if you're adopted that's going to be the case. Number three is the state determines that the child will not be adopted unless assistance is provided for that child."

Rospierski says the tax return must also include a copy of the state's determination of special needs.

More information about the changes is online on the Internal Revenue Service website.

While Tax Day is typically April 15, this year, the deadline for filing federal tax returns is Tuesday, April 17.




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