ABC’s of Adoption: A, Part 5
Today I will touch briefly on the adoption tax credit. I do want to preface this by saying I am not an accountant and have not yet even been able to claim mine, so please consult a tax professional about this and don’t just take my word!
A lot of agencies quote you a price after the tax credit. For instance, they will say an average adoption costs 15-18k, approximately 4-7k after the credit. This makes it sound so much more affordable. Here is the catch: you still have to pay the full amount up front and then wait and claim the credit. And a lot of people cannot claim the full credit at one time.
It is a credit, which means it comes off your tax liability. So, if you did not pay enough in to claim an almost $11,000 credit, you cannot claim the full amount. You claim whatever takes you to 0 and then rollover the rest for the following year. It can be rolled over for up to 5 years.
Another catch: you cannot claim it until the year after you finalize. (Although this issue has been debated. I consulted 2 well known tax specialists and someone directly at the IRS and was told we could not claim it until after finalizing.) So, we paid all expenses in 2006. Some began as early as February, but the last major bill was paid in August. We cannot claim the credit until February 2008 because Cameron’s adoption was finalized in March 2007. So, the short term loan we were told we would need, it turns out to be at least a year and a half, and that is only if we can claim the full amount, which we won’t be able to. So, when you factor in the interest on the adoption loan we took out, it is costing us a lot more than we had originally thought. And we cannot move forward with another adoption until we have the first paid off.
I hope this helps some. The adoption tax credit is a very confusing subject. Tomorrow I will tackle B!
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