Question about adoption & taxes ... ?

Robin

First of all, congratulations on your decision to parent your child! Don't you dare feel guilty for choosing to give your baby his or her own mommy!

Now, the taxes. The PAP's can only take qualified adoption expenses in the year the adoption is finalized plus any expenses made in the prior year (before the adoption was finalized)

Per the IRS, Qualified Adoption Expenses are:
Adoption fees, Attorneys fees, Court Costs, Travel Expenses (while away from home)

I'm not sure a deduction can be taken for doctor's visits or vitamins, as these are not direct adoption expenses. But I can't find a specific exclusion in the tax publication. If it violates state law to pay for a birth mom's expenses, a deduction cannot be taken on the federal tax return.

http://www.irs.gov/pub/irs-pdf/i8839.pdf
http://www.irs.gov/taxtopics/tc607.html

http://www.childrenshopeint.org/taxcredit.htm

In the meantime, please check out Concerned United Birthparents. They have a great brochure on choosing to parent & may have some resources to help...
http://www.cubirthparents.org/

Hope this helps.

ETA: Hold the phone! After reading Publ. i8839.pdf, it appears that PAPs can deduct qualified adoption expenses in a subsequent year when a (different) adoption is finalized. Meaning, if they finalize an adoption in 2009, they can deduct any qualified adoption expense made in 2008 on their 2009 tax return. You may want to check with a tax accountant. Tax law is complicated. (Instructions for Line 5 on pg. 4)

Kazi

Alyssa's mommy is correct, adoptive parents can only claim an adoption on their taxes, if the adoption is actually finalized. It does not matter how much money is spent.

While I think it shows that you are an honest and stand up kind of person, I do not think you have a responsibility to pay the money back. PAP's are made aware right up front that they can legally pay for an expectant mothers living and medical expenses, but that they should not expect to get it back if the mom changes her mind. Adopting is a financial and emotional gamble. It might not be easy for them (actually I know it's not), but it's not a surprise either. They knew this going in. You certainly do not have a legal responsibility, however, it sounds like you feel you have a moral one and you should follow your own conscience. I just don't think you should be doing anything because you feel guilty for keeping your baby and that somehow if you pay them back then everything will be okay. They may be hurt right now, but they will be okay. I am an adoptive mom so I understand how they might be feeling, but like I said, we all know it's a possibility and you should not feel badly about that. It may take some time and patience on their part, but odds are they will be parents eventually.

If you feel the need to return the money, then that is up to you. I just wouldn't do it out of some misplaced sense of guilt.

T R

My understanding of the adoption tax credit is that it becomes available only after the adoption is finalized. If there is no adoption, then there will be no credit. More basically, however, the credit covers only non-reimbursed expenses, so if you reimbursed for the expenses they would not be eligible toward a tax credit.

sunny

You made the right decision!

Congrats!

IDK!!

They will not get to use the tax credit, as it needs to be associated with an SSN of the child. YOU can use the expenses as a deduction though. If it's just a few doc visits and vitamins, I wouldn't bother...

wholelottacats

I cannot find the information, and not to contradict everyone, but they can claim the credit for a failed adoption. I know quite a few people who HAVE taken the credit for a failed placement. Once they successfully adopt, they can consider the failed placement as part of their adoption expenses for that adoption.

Were you working with an attorney or an agency? I would speak with them before sending these people any money. It is the law that you are not required to reimburse them the money they paid for Dr visits, etc. It's very noble of you to want to do it, but you are not required to. In fact, quite the opposite - there are laws saying you don't.
Depending on how the law is worded, (and I have no idea) it may actually be illegal for them to accept it.

PAPs know (or should know) that money given to a potential match is not money they will get back. It puts too much pressure on you, quite frankly, and puts you in a position of feeling obligated. You do need this money for the baby - so I would actually reconsider your offer to pay them. It is a risk they knowingly took.

Alyssa's mommy

Tax credits are for people who have successfully adopted a child. If they did not adopt your child by Dec 31st, 2008 they do not get any kind of adoption tax credit.

Either way though if they paid for your doctor visits and such and you backed out of the adoption process you do owe them the money back.

Edit: If you gave birth in 2008 you qualify for a child tax credit on your taxes. :) That can be over $2000!

icehockeymom7

They will not be able to use the tax credit because the adoption did not happen. And yes, you should pay them back for their expenses, that is the right thing to do. Good luck!

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