Adoption Tax Credit to Expire If Congress Doesn't Act

If Congress doesn't act quickly, the adoption tax credit, which has made it possible for millions of Americans to adopt, will expire at the end of the year.

First introduced in 1997, the adoption tax credit has been a powerful tool. Although the credit has morphed and expanded since its inception, its intention has remained the same, namely to offset some of the costs adoptive families incur while in the process of adopting. This has had the effect of promoting both domestic and international adoption and encouraging families who otherwise might not be able to afford the high cost of adoption.

The tax credit is significant, currently providing up to $12,650 for adoption expenses incurred in 2012 and $13,360 for 2011. Credits are given in direct response to eligible expenses and they are limited to Americans making under $185,210 or families with a combined income of less than $225,210 are eligible for the credit.

An important element of the current adoption tax credit is that it is refundable, meaning that families do not have to wait to offset their tax liability with the credit. Instead, since the passage of President Obama's Affordable Care Act of 2010, the credit is fully refundable in the form of a check from the IRS.

Senator Mary Landrieu (D-La.) together with Sens. Ben Cardin (D-Md.), Roy Blunt (R-Mo.) and Kay Bailey Hutchinson (R-Texas) has proposed new legislation designed to ensure that adoption tax credits remain in the IRS tax code. The "Making Adoption Affordable Act," which was introduced on September 21 of this year has been referred to the Senate Committee on Finance for review.

Although there is strong bipartisan support in the Senate for extending the adoption tax credit; the House is another story.

The Senate legislation actually follows a bill first introduced to Congress by Congressman Bruce Braley (D-Iowa) on April 17, 2012. Although House Bill 4373 Making Adoption Affordable has been referred to the House Committee on Ways and Means, it has not yet been taken up by the Committee.

Because Braley, the bill's sponsor, is a member of the minority party in the House of Representatives, the chances of this bill being moved forward are slim. In fact, gives it a 2 percent chance of passing.

If Congress doesn't act soon, the adoption tax credit will expire on Dec. 31, 2012. If this happens, most adoptive families will lose the tax credit. Only those families who have "authorized" expenses relating to special needs will be eligible for a tax credit, and that credit is significantly less than what is available today since it is set at $6,000.

This important tax credit, one that has helped millions of families adopt, will likely disappear if Washington doesn't hear from voters on this issue. It was pressure from the public that increased the original tax credit and made it refundable in 2010.

It's not too late to motivate Congress to action this time. In addition to calling and writing Congress, you can sign a petition showing your support for "Making Adoption Affordable Act" in the House and Senate.