Foster2Forever

by

Is Foster Income Taxable? What Foster Parents Should Know About Income Tax

IS FOSTER INCOME TAXABLE?

You do not have to report foster payments you received for providing foster care in your home as taxable income. Foster payments are NOT considered taxable income. (Foster payments are considered reimbursement)

According to the Turbo Tax website: “if care is provided to a qualified foster individual and they are paid by a state or qualified agency, foster care payments are NOT considered taxable income and are NOT included on tax return.”
These payments include those received from a state or local government or from a qualified foster care placement agency.

foster-income-taxable-adoption-credit

CAN I CLAIM FOSTER CHILDREN ON MY INCOME TAX RETURN?

You can claim a foster child on your tax return, only if the child has lived with you for over 6 months. (6 months plus 1 day) A foster child does not have to live in the foster parent’s home at the end of the year to be claimed.

IMPORTANT: Only one person can claim the same child.

TIP to avoid IRS problems: File your tax return as soon as possible in the event that birth family incorrectly claims a child. The IRS will immediately deny a claim if a child has already been claimed as dependent. It will be up to the second filer to prove to IRS that the child is their dependent. Foster parents who file after a child is already claimed have to go through this process.

WHAT IF I FILE AND THE CHILD IN MY CARE HAS ALREADY BEEN CLAIMED? 

The quickest way to resolve this is to go ahead and file your tax return without claiming the child.  Then, you can file an amended tax return Form 1040-X.  Then, you claim the child and attach placement papers and other documentation proving the child lived with you over 6 months. 

CAN I QUALIFY FOR EARNED INCOME TAX CREDIT FOR FOSTER CHILDREN?

You can now find out your filing status, your child’s status as a qualifying child, your eligibility for the credit, and estimate the amount of the credit you may get by using TurboTax.

WHAT IS THE ADOPTION TAX CREDIT?

Adoptive parents can receive a tax credit for the amount spent on adoption-related expenses. This applies even for failed adoptions. You can only receive tax credit for the amount you paid in taxes. However, you do have 5 years to carry over any unused credit from previous years.

HOW MUCH IS THE ADOPTION TAX CREDIT?

The Adoption Tax Credit for 2022 is $14,890. You can use the tax credit to reduce your federal tax liability (taxes you owe) for the next five years. For tax year 2022, the Adoption Tax Credit for qualified adoption expenses is $14,890 for each child adopted. You can adopt via public foster care, domestic private adoption, or even international adoption. The adoption tax credit only applies to Federal income taxes — NOT state income taxes. 

HOW DOES THE ADOPTION CREDIT WORK?

You can only apply the adoption tax credit to how much you OWE in taxes. You cannot apply the entire $14,890 if you do not owe that much in Federal income tax.

For example, if you paid $5,000 in Federal income taxes, but actually only owed $3,000 in taxes, your income tax refund would normally be $2,000.

However, you can use the adoption tax credit and apply it to the $3,000 you owe and get back the entire $5,000 of taxes you paid as a refund.

What if you don’t owe $14,440 in taxes for 2022?

Here is good news — IRS allows you to apply the balance of the $14,440 tax credit over five years.

Continuing the example from above, the next tax year of 2023, you can carry over the remaining amount of the adoption tax credit. ($14,440 – $3,000 = $11,440) means you could apply $11,440 to what you owe in taxes in 2023 – each year up to tax year 2026!

Clear as mud, right?
That’s why we use TurboTax – just answer the questions and TurboTax will guide you through and complete the forms for you. TurboTax Deluxe is the version that includes the Adoption Tax Credit Form 8839. 

WHAT ARE QUALIFIED ADOPTION EXPENSES?

Qualified adoption expenses include reasonable and necessary expenses necessary for the adoption.  Examples of qualified expenses include:

  • agency fees,
  • home study costs,
  • court fees,
  • attorney fees,
  • medical examinations/physicals costs,
  • dossier fees,
  • traveling expenses (including amounts spent for airline, gas, meals and lodging while away from home), and
  • other expenses that are directly related to the adoption of a child.

Expenses for domestic adoptions that are not yet final can be taken the year after the expenses are paid or you can wait until the adoption is final.

HOW DOES THE ADOPTION TAX CREDIT WORK IF WE ADOPTED A SPECIAL NEEDS CHILD?

With the adoption of a U.S. child with special needs, you may be eligible for the maximum amount of credit for the year of you finalize the adoption, even if you paid no qualified adoption expenses.

If you adopt a child with special needs through foster care, you may be entitled to claim the full amount of the adoption credit even if you did not have expenses.

Each state has different criteria that qualify a child as “special needs”. The special needs declaration must come from the state in which the adoption was final. In order to qualify as a special needs adoption, you must have a signed adoption “Subsidy Agreement” with the state. (Some states call it the “Adoption Eligibility Assistance Determination.”)

WHAT IS CONSIDERED A SPECIAL NEEDS ADOPTION?

A child is considered special needs for purposes of the adoption credit if all of the following conditions are met:

  • The child was a U.S. citizen or resident when the adoption effort began (no international adoptions);
  • A state determines that the child cannot or should not be returned to his or her parent’s home (child placed in foster care);
  • A state determines that the child probably will not be adopted unless assistance is provided to the adoptive family (parents receive monthly post-adoption subsidy)

Generally, special needs adoptions are the adoptions of children whom the state’s child welfare agency considers difficult to place for adoption.

Most foster care adoptions are considered special needs adoptions. Special needs adoptions can include:

  • minority children over the age of 2,
  • any child over the age of 6,
  • siblings placed together, or
  • other special needs.

If you receive a monthly subsidy after adoption, your child would fall into this category.

WHAT IRS FORM DO WE FILE FOR THE ADOPTION TAX CREDIT?

To claim the adoption credit or exclusion, complete Form 8839 (PDF), Qualified Adoption Expenses, and attach the form to your Form 1040 (PDF) or you could just download TurboTax and answer the questions.

Disclosure: I am not a tax professional. I compiled this information from the IRS website, Intuit TurboTax website, and my questions to a tax professional.

foster-income-taxable

by

Claiming the Federal Adoption Credit

FEDERAL FUNDS ARE AVAILABLE FOR ADOPTIVE PARENTS!

federal-adoption-credit Did you, or someone you know, adopt a child from the foster care system in 2011?

If so, you may be eligible for a $13,360 refund per adopted child from the IRS — so long as it is claimed before April 15, 2015 – less than five months from now.

Many families are not aware that they are eligible for these funds, and are often incorrectly told by tax preparers that they do not qualify. The main eligibility requirements are:

  • Adoption of a child from the foster care system in 2011;
  • Adopted child(ren) receive a monthly post-adoption subsidy.

AdoptFund has helped nearly 1,500 families across the country claim $27.5 million in adoption credits. AdoptFund specializes in assisting families obtain this credit, and have worked with many community-based care agencies such as Our Kids of Miami-Dade/Monroe and the Sarasota Family YMCA, as well as adoption attorneys. One AdoptFund client, Alena, adopted a child from the foster care system with severe medical issues in 2011, and received the full Adoption Credit of $13,360 within 7 months of applying for it. Using this money, she was able to afford medical equipment and supplies that were previously out of her price range, vastly improving her adopted child’s quality of life, as well as helping to ease some of the burden from herself. Another AdoptFund client, Rebecca, adopted her grandson out of the foster care system in 2011, and received the full Adoption Credit of $13,360 within 8 months of applying for it. Using this money, she was able to reclaim her car from reposition, allowing her to drive her grandson to and from school again. She also had enough left over to set up a college fund for her grandson, and was able to afford new computers for her and her family.

AdoptFund can also help you with your 2014 Federal IRS income tax return — the adoption tax credit for 2014 is $13,190.

Don’t wait until it is too late – call AdoptFund now, toll-free, at (855) 991-7680 for a free, no obligation consultation, or visit the AdoptFund website at www.adoptfund.com, find AdoptFund on Facebook and follow on Twitter @Adoptfund.

2014-federal-irs-adoption-income-tax-credit

This is a sponsored post for AdoptFund.

by

The Blessings of an Adoption Baby Shower

20130225-113329.jpg
Adoption is such a blessing! For those wanting to add to their families. For those birth mothers overwhelmed by motherhood. For the children who need a stable place to belong…forever.

This weekend, I was blessed to be part of a celebration of a child joining a family. I attended a baby shower of a close friend who received a call two weeks ago for a baby abandoned/relinquished upon birth at a Houston hospital. The birthmother went to the hospital because of extreme abdominal pain and was told she was in labor. She didn’t even know she was pregnant!

My sweet friend and her husband were in the last stages of their adoption paperwork when they received the call for this baby girl. They had to rush out to complete their fingerprinting before they could pick up their daughter.

The baby was referred to as a “drop” baby (as in unwanted) and placed in a foster home when she was released from the hospital.

The irony is that the adoption agency is Alternatives in Motion, the same adoption agency that my husband adopted his son, 21 years ago. Two other couples I know from Houston are listed as waiting families, although Amy & Tim recently added a baby boy to their family a few months ago.

This Christmas, in their newsletter to adoptive families, AIM sent a plea for help for birthmothers. Our Sunday School class sent a Christmas love offering.

Isn’t it amazing how blessings come full circle?

I am thrilled for my friend who is a natural at motherhood.

Last week, I asked fans on Facebook about gifts for an adoption baby shower. Thank you for your suggestions! Here is the haul (I did have to explain some of the items to this new mom!)

20130225-120946.jpg

by

Adoption Tax Credit: What You Should Know

If you follow on Facebook, you know that Congress enacted the American Tax Relief Act of 2012 to avoid a “fiscal cliff”. Here is what the text of the actual bill (H.R. 8) says about the IRS adoption tax credit(1):

(A) ADOPTION CREDIT.—

(i) Section 23(b) is amended by striking paragraph (4).

(ii) Section 23(c) is amended by striking paragraphs (1) and (2) and inserting the following:

‘‘(1) IN GENERAL.—If the credit allowable under subsection (a) for any taxable year exceeds the limitation imposed by section 26(a) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section and sections 25D and 1400C), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.’’.

(iii) Section 23(c) is amended by redesignating paragraph (3) as paragraph (2).

Clear as mud, eh??? {The American Tax Relief Act actually amended the Internal Revenue Code so the numbered references are to IRS Federal tax laws.}Federal-IRS-adoption-tax-credit

What happened to the adoption tax credit in this 2012 law?

The adoption tax credit was made permanent in the Federal tax laws!!! The adoption tax credit has only been around since 1997 and was reauthorized by a number of bills but now is permanently written into the tax laws. The adoption tax credit was fully refundable in tax years 2010 and 2011; however, it is not anymore.

What does it mean if the adoption tax credit is “refundable”?

Refundable means that you get credit for the entire amount of your adoption expenses, regardless of what you paid in taxes. Since tax year 2012, you can now only get credit for the amount you paid in taxes; however, you do have 5 years to carry over any unused credit from previous years.

How much is the adoption tax credit?

For tax year 2012, the amount is $12, 650 per child for qualified adoption expenses.

For tax year 2013, the amount is $12,970 per child for qualified adoption expenses.

For tax year 2014, the amount is $13,190 per child for qualified adoption expenses.

What are qualified adoption expenses?

Qualified adoption expenses include reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging while away from home), and other expenses that are directly related to and the principal purpose of which are for the legal adoption of a child.

How does the adoption tax credit work if we adopted a special needs child?

With the adoption of a U.S. child with special needs, you may be eligible for the maximum amount of credit for the year of you finalize the adoption, even if you paid no qualified adoption expenses.

What is considered special needs?

A child is considered special needs for purposes of the adoption credit if all of the following conditions are met:

  1. The child was a U.S. citizen or resident when the adoption effort began.
  2. A state determines that the child cannot or should not be returned to his or her parent’s home, and
  3. A state determines that the child probably will not be adopted unless assistance is provided to the adoptive family.

Generally, special needs adoptions are the adoptions of children whom the state’s child welfare agency considers difficult to place for adoption, and most foster care adoptions are special needs adoptions, but few other adoptions are considered special needs adoptions.

What IRS Form do we file for the adoption tax credit?

To claim the credit or exclusion, complete Form 8839 (PDF), Qualified Adoption Expenses, and attach the form to your Form 1040 (PDF) or Form 1040NR (PDF).

Disclosure: I am not a tax professional. This information was compiled from the IRS website regarding the adoption tax credit.

by

The Gift of an Open Adoption – Even in Foster Care

Never have I struggled so much to compose a blog.  I must have opened and closed my computer 100 times mulling over the angle to take on this topic.  Ironically, that is much like open adoption itself; One thousand different options. Wikipedia quotes an author that nicely explains “Adoption is like marriage. There are countless ways that a marriage can work. What is right for one couple will not work for another. Adoptions are the same.”

So instead of telling you what an open adoption should look like, I am going to tell you about our open adoptions.  I truly believe they are one of the greatest gifts I can give to my kids.

My relationship with our kids’ parents did not start under the best circumstances.  As a foster parent, it was a challenge to form a relationship in the midst of a negative situation. Watching the family interactions, I immediately found “the good” in the parents’ love.  My kids are loved very much by their biological parents.

As our first case progressed, so did my relationship with my son’s parents.  I had a very emotional meeting with his mother where we discussed contact and visits.  His parents were so grateful to know that we would maintain communication that they voluntarily terminated their rights (essentially choosing us to be his parents). We have agreed to annual visits and twice yearly updates, though we have more frequent email communication.  Our first visit went very well.  He looks JUST like his mom, and I love that he will have a relationship with her.

With our second case, the circumstances were a little different.  I wrote our daughter’s mom a heartfelt letter explaining how we loved her, and she would always know she was loved by her mom.  The response was overwhelming.  A gift basket with multiple cards of gratitude, a book stating we had changed her life and a few gifts for our daughter – including a children’s bible.  That simple act of a letter opened up a floodgate and the first show of interest in a relationship.  We will maintain contact through the agency and consider visitation if appropriate in the future.

Ironically, in the middle of this writing, we have come to a necessary decision to move from unsupervised to supervised contact with extended biological family to protect our daughter.  It is a beautiful thing to allow communication and foster the relationship.  It is also important that it is appropriate.  To this, I would just add, when discerning the extent of openness it is important to enact clear boundaries.  I am grateful to have learned this quickly for myself. Err on the side of less and offer more if it seems appropriate down the road.

Ultimately, don’t let fear of open adoption keep you from moving forward.  Everything about adoption is a journey.  It took training, prayer and time for us to embrace the idea.  And it took sitting face to face with a birthmother to get it.  Our family has grown as a result of our openess and we hope our children will always be blessed by this gift.

Elisabeth has desired motherhood since puberty.  She was blessed to meet Mr. Right  & wed in 2002.  The road to parenthood was long, filled with tears & suffering.  In 2007, they were blessed with their miracle “Rosie” thanks to the help of NaPro Technology.  With secondary infertility, Elisabeth & Mr. Right entered the world of foster care.  They adopted “Augie” in 2011 and hope to adopt “Caite” this spring.  Elisabeth is an at home mom, who twilight’s as a FertilityCare Practitioner. Elisabeth blogs at Blessed and Broken.

by

Take a Chance on a Foster Child

Most prospective adoptive parents are afraid of the idea of fostering. We were too.

We did not want to care for a child for years and then give them back. We wanted to adopt. If fear had stopped us, we would not have been twice blessed by the tremendous gift of adoption through foster care.

Our first adoption attempt was through a domestic agency. We were seeking the placement of an infant. Wait times were upwards of two years. During that wait, we were extremely blessed by a surprise conception after four years of infertility. This also disqualified us from moving forward with infant adoption through that agency.

When secondary infertility became apparent, it was much easier to pick up where we left off. Except, our first agency only placed to childless couples. There was also the issue of finances. I left my job when Rosie was born and without a second income, we could not foresee raising the necessary funds to adopt.

Around that same time, a friend was in the process of back to back adoptions from our county foster care agency. Their first placement was a baby boy, who they picked up from the hospital. Their second placement was a four year old boy. I watched as over time these precious little boys so completely merged into their family. It was, perhaps, the first “adoption story” I witnessed in real time, in real life.

Their example allowed me to pick up the phone and call our county. We began training the following month. Two months later we received our first call. An interview was scheduled. There was a 2 month old boy in need of an adoptive resource family…would we accept him? We had not even finished our training yet! We were emergency certified and brought him home a week later.

He was the sweetest little red head with curly hair. He came into our home sick, and that sickness wiped out our entire family for a month. The transition was rough. Bonding was slow. A friend had advised me to keep a guarded heart. His birth parents were obviously upset about his placement in foster care. They clearly loved him. At his weekly visits, we slowly got to know one another. They were nice people with difficult lives. It was not likely they would be getting him back.

In July, we adopted Augie, 16 months after he was placed in our home. We have an open relationship with his birth parents and I can truly say I love them. We had such a good experience with round one of fostering that we accepted our second placement weeks after our first adoption. Our foster daughter just turned one and we are in the FWW (four week wait – from termination of parental rights). We are hoping for a spring adoption…which would put us at about 10 months from placement to adoption in her case.

Had we not taken the chance on foster care we could still be waiting to adopt.

 

Elisabeth has desired motherhood since puberty.  She was blessed to meet Mr. Right  & wed in 2002.  The road to parenthood was long, filled with tears & suffering.  In 2007, they were blessed with their miracle “Rosie” thanks to the help of NaPro Technology.  With secondary infertility, Elisabeth & Mr. Right entered the world of foster care.  They adopted “Augie” in 2011 and hope to adopt “Caite” this spring.  Elisabeth is an at home mom, who twilight’s as a FertilityCare Practitioner. Elisabeth blogs at Blessed and Broken.

by

What Does the SuperBowl Have to Do With Adoption?

Usually the SuperBowl has absolutely nothing to do with adoption – But this Sunday, SuperBowl XLVI can be different.

Are you having a SuperBowl party or watching the big game with friends?

Tony Dungy, the SuperBowl-winning former coach of the Indianapolis Colts and adoptive father, is taking the orphan crisis to American families through a video download kit. This free kit is available to everyone to be shown at game watching parties anywhere.

Dungy and his wife, Lauren, who have adopted 4 children, and are sharing their personal thoughts about adoption and the current orphan crisis through the Adoption Journey Project.

Their hope is to encourage more Christians to consider adoption.

“The big win on Super Sunday would be to raise awareness about the millions of children who need a family. I would love to see thousands of local community groups and circles of friends gathering together to stop and consider how they can help.”

What can you do to promote adoption this SuperBowl Sunday?

If you are hosting or attending a SuperBowl party, you can promote adoption by:

  • Download the free video kit to show at the party

If you have a blog, you can promote adoption by:

  • Write to your readers, encouraging your readers to promote adoption this SuperBowl Sunday

If you have a Facebook account, you can promote adoption by:

If you are on Twitter, you can promote adoption by:

  • Tweet this post and use hashtag #DungyForAdoption

If you are part of a church family, you can promote adoption by:

 Will you share this post now???

by

Are Your Children Eligible for Adoption Assistance Benefits?

I just registered for a free webinar to learn more on adoption assistance benefits.  The North American Council on Adoptable Children (NACAC) will host the free hour-long webinar tomorrow, Tuesday, January 31st at 2:30 p.m. (CST).

Adoption Assistance Benefits and Eligibility

This webinar will be presented by Josh Kroll and provide information about adoption assistance benefits, including which children are eligible and the benefits available. The session will be of use to prospective adopters as well as parents who are seeking to make a change in the child’s benefits due to changes in the child’s needs or family’s circumstances.

Click to register for Adoption Assistance Benefits and Eligibility.

Will you be able to attend this free webinar?

by

This is How Inefficient our Government Really Is

Have you read this book written by a former foster child?


We were so excited to finally adopt our Lil Bit! Now, over two months later, we are still anxiously awaiting the arrival of his new birth certificate!

Yesterday, while glancing through the mail, I saw a plain white envelope from the state Health and Human Services! I excitedly opened the envelope to find…

Lil Bit’s Medicaid card!

Printed on the card in bold was his new name! Our family name! Lil Bit’s first “official” card with our family’s name!

After our excitement waned, I began going through the rest of the mail. To my surprise, was another envelope from the state Health and Human Services, identical to the first. Could it be his birth certificate?

My curious hands opened the second envelope to find…

another Medicaid card!

Not a duplicate card. Another Medicaid card printed with Lil Bit’s BIRTH name!

So now we have TWO Medicaid cards with both of Lil Bit’s names. (Same Medicaid number, of course)

For those of you whose adopted children receive Medicaid, is this what normally happens?

How much longer until we receive Lil Bit’s birth certificate?  Which name will be printed on it?

I’m Clever

Sway