Kelly Ellison, adoptive mom and founder of Your Adoption Finance Coach, shares some key takeaways from her recent webinar on the Federal Adoption Tax Credit.
WACAP is committed to building strong families; partnering with Your Adoption Finance Coach, we offer adopting families coaching support and resources to help them become financially prepared for their adoption, and as a result, even more equipped to focus on the child waiting to be welcomed home.
Call it the eighth wonder of the adoption world, the Adoption Tax Credit has helped thousands of adoptive families recoup the costs of their adoption. Recently, we hosted a live webinar with Adoption Tax Credit expert Becky Wilmoth, who enlightened over 90 families on several important details about the tax credit.
Below is a list of takeaways that many of us heard for the first time:
Employer Reimbursement Programs can vary and have two different tax implications.
Reimbursements: While reimbursements are great, we have to watch out for whether or not these are considered taxable. Your human resources staff should know how they will disburse the funds and typically, it is after the fact and based on receipts/expenses. It will likely appear on your W-2 and if it’s taxed will have a code T next to the amount reimbursed.
Qualified Adoption Assistance Program: This is the best benefit if you are fortunate enough to have a company that offers it. Not to take away from the reimbursement benefit – (kudos to all who offer reimbursement support!) – but the qualified programs are extra-special and here’s why:
- First, the company takes the steps to create this program with the IRS.
- As a benefit of this action, they can allow the employee to withhold $13,470 (amount of the tax credit) from taxable income AND the employee can also take the adoption tax credit on their own taxes.
- The only catch is that they cannot use the same expenses.
Creating the Best Plan
The bottom line, remember this important factor when considering adoption: While there is no silver-bullet, no one ‘thing’ that is going to cover the cost of all of your adoption fees and related costs, there are many ways to develop a plan for how you’ll come up with all the funds you’ll need to help bring your family together.
Some excellent resources are listed at the base of this article for how you can learn more about this credit.
Reasons to Advocate
Oh, and by the way, advocate, advocate, advocate. Even though the tax credit was made permanent as a result of past advocacy efforts, the credit still needs to be refundable. (When a credit is not refundable” families can receive back only as much as they have in federal income tax liability.)
Reach out to your senators and representative to let them know how important changing the Federal Adoption Tax Credit to a refund is to the future of so many families.
As an adoptive family, or as someone connected to the adoption community, you can make a difference by being an advocate for adoption. A way to do this, in addition to advocating for the tax credit’s becoming refundable, is to approach your employer and see if they have an adoption benefit. If they don’t, maybe you can volunteer to help them create one. It’s possible that other employees have gone through exactly what you may be experiencing, but didn’t ask.
A great resource for how to create an adoption-friendly workplace is the Dave Thomas Foundation. This website has a complete adoption-friendly kit that can be downloaded and shared with the right folks.
As always we recommend that you check with your accountant or CPA to verify the information provided in this article. We are NOT accountants or CPA’s and this information is not to be considered tax advice.
Below are some resources that you may find helpful:
- North American Council on Adoptable Children www.nacac.org
- Bill’s Tax Service – http://centralia-il-taxservice.com
- IRS – http://www.irs.gov/Credits-&-Deductions/Individuals/Adoption-Credit
- Adoption Tax Credit – www.adoptiontaxcredit.org
About Your Adoption Finance Coach:
Your Adoption Finance Coach offers online resources, training and one-on-one coaching helping adoptive families create and implement a financial plan for completing their adoptions. Founder/CEO Kelly Ellison is also an adoptive parent, and understands the complexities of planning for an adoption and navigating the process. She holds an M.A. in Business Administration and has over 25-years of experience in nonprofit leadership, marketing and fund-development. An experienced speaker, facilitator and executive coach, Kelly brings her background and adoption expertise to over 1,200 families and professionals from over 30 adoption agencies across the U.S.