Legislation to Make Adoption Tax Credit Refundable

Casey Introduces Legislation to Make Adoption Tax Credit Refundable

Making Credit Refundable Would Extend Benefits to More Families

Thursday, May 23, 2013

In 2011 62% of Filers Benefited from Refundable Credit

Washington, DC –Today U.S. Senator Bob Casey (D-PA) introduced the Adoption Tax Credit Refundability Act of 2013 with Senator Mary Landrieu (D-LA) and Congressman Bruce Braley (D-IA). The bill would make the Adoption Tax Credit fully refundable. Making the tax credit refundable would extend its benefits to more Americans. According to IRS data, 62% of filers in 2011 benefited from the refundable Adoption Tax Credit. In 2010, Senator Casey championed provisions, which were signed into law, to increase the value of the tax credit and make it permanent for two years.

“Making the Adoption Tax Credit refundable will support and encourage adoption by assisting families with some of the costs,” Senator Casey said. “The Adoption Tax Credit has been a proven success in increasing families’ ability to offer permanent homes to adoptive children. Making the credit refundable will allow more families to experience its benefits.”

The adoption tax credit was made permanent in the American Taxpayer Relief Act in January 2013.  However, that law did not extend the refundability provisions that applied to the adoption tax credit in 2010 and 2011.  The Adoption Tax Credit Refundability Act will restore the refundable portion of this critical support for families wishing to adopt.

According to the Department of Health and Human Services, one-third of all adopted children live in families with annual household income at or below 200 percent of the poverty level.  Despite the common misperception that only wealthy families adopt, nearly 46 percent of families adopting from foster care are at or below 200 percent of the federal poverty level.  Many of these families’ tax burdens are so low that they cannot benefit from the adoption tax credit at all unless it is refundable.

Preliminary 2011 data indicate that nearly 62 percent of families who filed for the adoption tax credit benefited from refundability.  Forty-one percent of families who benefited from refundability (25 percent of all families who took the tax credit) had adjusted gross incomes under $50,000.

These data indicate that a refundable adoption tax credit plays a significant role in lower-income families’ ability to adopt and support a child from foster care.  Older data from a 2006 study cited by HHS demonstrate a significant financial benefit to society, as well: the cost of adoption and permanency is significantly lower than the cost to federal, state and local governments to provide long-term foster care.

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