Adoption Tax Credit

I recently sent a message to my State Congressional Representative asking him to ensure that the Adoption Tax Credit becomes part of the permenant tax code.

This tax credit helps to reimburse families for the legal costs of adoption by reducing their tax burden. We have benefitted greatly from this credit in both of our adoptions and without it I do not believe that we could have adopted our girls.

I'm posting the Congressman's reply here, to help spread the word that the congressional officials need to hear how important this tax credit is, even though it is used by only a very, very small portion of society.


May 21, 2009

Dear Jessica,

Thank you for contacting me in support of H.R. 213, the Adoption Tax Relief Guarantee of 2009. I appreciate you taking the time to share your thoughts with me on this important issue.

As you may know, the federal government provides assistance for the adoption of children through federal grants to states, and through the tax code. Although federal assistance programs for adoption focus primarily on children adopted out of foster care, federal adoption tax provisions are available for all adoptions (except for adoptions of step-children).

Congress created federal tax assistance for adoption through the enactment of the Small Business and Job Protection Act of 1996. This Act added tax incentives for adoption to the existing federal adoption assistance grant programs by creating a tax credit and an income tax exclusion of up to $5,000 per adoption and $6,000 per adoption of a special needs child. The Economic Growth and Tax Relief Reconciliation Act of 2001 provided an increase in qualified expenses for the credit and the income tax exclusion to $10,000 (indexed for inflation), but also included a sunset period. Beginning in 2011, the prior law limits of $5,000 and $6,000 will become effective again unless extended in new legislation.

The tax credit and the income tax exclusion significantly limit who may benefit from the tax provisions. Both provisions are subject to a phase-out rule which creates an income cap, and puts in place a minimum income level on the use of the tax credit. As a result, in tax year 2004, very few families with an adjusted gross income of less than $25,000, or with an adjusted gross income of $200,000 or more, claimed the credit. In tax year 2004, approximately 71,100 tax returns, or .05% of all tax returns, included a claim for the adoption tax credit, with a total credit value claimed of $301.9 million.

Currently, H.R. 213 is under review in the House Committee on Ways and Means. While I do not sit on this committee, I look forward to learning more about this legislation through committee hearings and reports. Please be assured that as tax legislation is introduced and debate this Congress, I will keep your strong support for H.R. 213 in mind.

Again, thank you for sharing your concerns on this issue with me. Please, do not hesitate to contact me on this or other issues that may arise.

Sincerely,
Adam Smith
Member of Congress

AS:sm

If you'd like to receive occasional e-mail updates from my office, please visit my website to sign up - http://www.house.gov/adamsmith/IMA/newsletter.shtml.Sincerely,Adam SmithMember of Congress