One of the main reasons I began this blog was to share the sort of information that I had such trouble finding online about adoption/infertility/same sex families. This is one of those things that so little is known about, yet it's absolutely crucial for some of us to know!
If you go to any website at all connected with adoption, you will be BOMBARDED with encouragement to take the Adoption Tax Credit. Many adoption agencies say things like: "Well our fees are $20,000 but the tax credit is $13,000 so it's like getting a baby for $7000!"
So not true.
First of all you have to pay that $20,000 up front. This was our problem -- getting lines of credit in this horrible economy! Then you cannot claim the credit until after the adoption is finalized (if it ever is) which is easily a good 2 years after you spent the money and in our case have been making 2 years of debt payments on that adoption/failed adoption.
Then, until this year the credit rolled over each year if your tax liabiliy didn't match the amount you were claming the credit for. Since same-sex couples like us have to file as singles (*&^%%!!!) and we don't make a lot, this meant that our credit might expire before we could have claimed it all!
This year it's fully refundable (yay!) but this provision was included in Obama's health care law which everyone and their brother is trying desperately to repeal (sigh). And anyway, every year they threaten to make the adoption tax credit go away or be drastically reduced so it is NOT a guarantee that it'll be available to you.
Then if you're lucky like us and do an independent adoption where no one will refund any of your money if it fails (some agencies will roll over your fee to the next match) and then it fails -- you are left with tens of thousands of dollars of debt payments and no baby (yay!).
So for 1.5 years we faithfully saved receipts and prayed for Jan 31 2011 to come around so we could file for a credit for that god-awful failed adoption that devastated our financial lives. January 2011 rolls around and THEN we learn that because the adoption never finalized we can only claim our 2009 adoption expenses this year (a fraction of what we were expecting). Well, crap.
So we call the IRS and ask if we need to send any documentation when claiming for a failed adoption, since the Form 8839 is woefully silent when it comes to failed adoptions. They said no.
So we filed, praying we'd get every penny because thanks to M this is the only way we can pay for my hospital bill and (unpaid) maternity leave when the baby is born. And then like the rest of the adoption community this year -- we got our refund minus the adoption credit part.
A few weeks later we got a letter saying they might ask for more documentation but not saying what. A little bit later we finally got a letter saying they wanted a copy of our homestudy (if the adoption was not finalized), explanation of all expenses, and receipts or cancelled checks for all expenses. Fair enough. But that would have been great to know last winter when we were preparing our taxes. Might have saved us months in waiting for this refund. So in the next week we will send all this to the Tax Examiner person listed in the letter and pray some more.
In all my research, I have only heard of one person getting their credit for a failed adoption (although it's supposed to be perfectly OK to do this), and she had to go to the Tax Advocates to get it. If we don't get this refund, I don't know how in the world we'll pay for the post-delivery hospital bill and my (short) unpaid maternity leave. I hate the thought of returning to work 3 weeks post-partum. So send us good thoughts, please.
So that's our experience thus far with the adoption tax credit. If only our lawmakers realized how very important this credit was to adoptive families. This credit should be protected at all costs.
