Vol. 16, No. 2 • May 2012

A Reader Asks . . .
Can I still get an adoption tax credit?

Question: I will be adopting my foster child in 2012. I have heard about the Adoption Tax Credit, but understand that it ended in 2011. Can you clarify this for me?

Congratulations on your upcoming adoption! A permanent family is the greatest gift for children waiting in foster care, and we wish your new family all the best.

There have been many changes in the Federal Adoption Tax Credit during the past several years, and more changes can be expected as President Obama and the Congress continue to work on the federal budget. We encourage you to consult a tax professional to get the best information regarding your specific circumstances. What follows is an overview of the Adoption Tax Credit as it currently exists.

According to the North American Council on Adoptable Children (NACAC), for adoptions finalized in 2011, there is a federal adoption tax credit of up to $13,360 per child. The 2011 adoption tax credit is refundable, which means taxpayers can typically get the credit refunded regardless of what they owe or paid in taxes for the year. Even people who have no income can qualify for a refundable credit. The credit is paid one time for each adopted child, and should be claimed when taxpayers file taxes for 2011.

For 2012, the tax credit will be $12,650 per child. Families who adopt children with special needs will be able to claim the full credit regardless of their qualified adoption expenses. Other adopters will have to have qualified adoption expenses.

Unlike previous years, the credit will NOT be refundable, meaning that families can benefit only if they have federal income tax liability. Just as before 2010, families will claim the credit with their 2012 taxes, use what they can that year, and then can carry any remaining credit forward for five additional years until the credit is used up or time runs out.

In 2013, the tax credit for families who adopt children with special needs from foster care will decrease to $6,000. The 2013 credit will be based on expenses so families would need to have qualified adoption expenses to claim any credit. The credit will not be refundable, so families can benefit only if they have federal income tax liability. The income limits for the credit will also be reduced significantly in 2013, meaning that families with higher incomes will not benefit. For these reasons, families considering adoption may want to complete their adoption in 2012.

If you have more adoption tax credit questions, contact the North American Council on Adoptable Children (651/644-3036; [email protected]) or ask tax professional.

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Question: I am a licensed foster parent. I didn’t think I wanted to adopt, but now I do and my agency doesn’t do adoptions. What are my options?

Some child-placing agencies are not licensed to complete adoptions. Talk to your licensing social worker to see if your agency has a relationship with an agency that does adoptions. Otherwise, you will have to identify an agency on your own. A list of all child-placing adoption agencies in North Carolina can be found at www.ncdhhs.gov/dss/licensing/docs/cpalistadoption.pdf

You will want to select an agency and submit an application. If your current agency is willing to share your foster care licensing file with your new agency, it may speed up the process. Your new agency may require you to attend their training, since they will be the agency to approve you to adopt and provide you with post-placement services.

The state of North Carolina has a contract with five private child-placing adoption agencies. These agencies—Another Choice for Black Children, Barium Springs, Children’s Home Society of North Carolina, Lutheran Family Services and Methodist Home for Children—provide services free of charge to families willing to adopt waiting children in foster care.

The NC Kids Adoption and Foster Care Network is here to help you connect with a new agency. If you have any questions, feel free to contact us at 877-625-4371, Monday through Friday, 8:00 a.m. - 5:00 p.m. Thank you for your willingness to provide a permanent family for our children!
Response by the NC Division of Social Services. If you have a question about foster care or adoption in North Carolina, send it to us using the Fostering Perspectives contact information found in the box above.

Response by the NC Division of Social Service. If you have a question about foster care or adoption in North Carolina that you would like answered in this column, send it to [email protected].

~ Family and Children's Resource Program, UNC-CH School of Social Work ~