Wednesday, September 24, 2008

By Request - Adoption Incentives

IRS Form 8839

In english now...This is the form that you MUST file the tax year the adoption is finalized. If you are not eligible for the tax credit the year the adoption is finalized, for example if your adjusted gross income is greater than $210,000 (give or take), you have up to five years to claim the subsidy. I'd pay a CPA to figure this one out. Private adoption subsidies are "reimbursements" for actual costs related to adoption, home studies, travel expenses, adoption fees, etc. If you adopt a special needs child from foster care, you can claim the entire $11,390 regardless of your out of pocket expenses. Explained here. If your tax liability for the year is less than $11,390 you must also fill out a carryover form.

Federal Title IV adoption assistance - here it explains that most children in foster care are eligible for this assistance.

Here are some of my friends' states

To find yours go HERE and type in the full spelling of your state and "adoption subsidy".

Note that the amount listed for adoption subsidy is for the legal expenses related to adopting the child. Most attorneys who regularly work within the system will direct bill the state and you will not have to pay the attorney nor will you recieve the check. But this is what triggers the IRS adoption incentives. If you qualify for this state assistance you automatically qualify for the IRS assistance under "special needs". Even if you do not receive further assistance from your state. *****legal disclaimer****I am not a professional consult a CPA in your area, don't sue me, you won't get anything.

If you have already adopted prior to this year, you can appeal to get credit for previous years if you were not informed that these incentives existed. Most agencies I've dealt with don't cover this, but I'll bet they have you sign something that says they did, just being cynical. But worth it to look into.

In my circumstance, when we adopt we will be eligible for special needs subsidy, even though our children are normal and healthy. They qualify for several factors, being they are of a minority group and over the age of two. They are part of a sibling group being adopted together. When the children are placed in adoptive placement their Medicaid cards will change from the state's budget to the fed's budget. We will also begin to receive a monthly stipend, based on the level of care the children are receiving when placed into adoptive placement. We will also be eligible for respite and other things. We will not be able to receive those because there are certain hoops we'll have to jump through to receive them. We are not going to be jumping through any more hoops, but each child would receive 50 respite days a year, that could be used for day camps and sleep away camps and respite respite. Our kids would also be eligible for full tuition at any state college. Some colleges even offer room, board and books.

Also note that if you have a child currently placed in foster care once they transfer over to adoptive care you will stop receiving foster care money. Your adoption subsidy will kick in the first day of the next month, so tricky dick accountant says "Don't accept an adoptive placement until the last three days of the month." This will limit your losses. I know we're not doing this for the money, but take advantage of all the programs to their fullest extent.

So, I hope that was helpful. I do just want to remind everyone to check and see if their children qualify as "special needs" generally speaking kids in foster care do regardless of their mental and physical capabilities. Check it out with your CPA - we generally pay about $200 - $400 a year and we have a corporation and many other facets so, investing a couple of hundred bucks to see if you qualify for several thousand may be worth it.

1 comment:

BrutallyHonest said...

Thank you for clarifying this, Annie. I am going to forward this info to my hubby too. We are trying to figure out how all of this works. We may as well take advantage of any tax credits we can get! Why not!

Thanks again for explaining this.