Most vulnerable casualty of DC tax battle may be orphans, foster kids

Amid talk of the “fiscal cliff” and how much wealthier Americans should pay the government, not much attention has been paid to the most vulnerable class of tax code casualties: orphans and foster kids desperately hoping to be placed in loving homes.

But among the so-called Bush tax cuts set to expire at the end of the year is a one-time adoption tax credit that can give families nearly $13,000 in aid for taking in a parentless child. Advocates fear that if the tax credit is not renewed, tens or even hundreds of thousands of kids will be left to fend for themselves.


"Without the tax credit, thousands of parents who could not afford to do adoption would just simply not be able to adopt children," said Bill Blacquiere of Grand Rapids, Mich.,-based Bethany Christian Services.

The tax incentive, first written onto the Internal Revenue Service books in 1997, allows people who want to adopt children but don’t have the financial means to take in kids who might otherwise grow up in foster homes.

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According to the National Council for Adoption, there are more than 100,000 children in foster care in the U.S., and millions more orphaned and abandoned children around the world. Cutting the tax credit for adopting these children will mean far fewer find homes, say advocates. The council has started a website,, with the hope of building support for making it a permanent part of the tax code.

While both parties in Washington, as well as the White House, appear to support the adoption tax credit, the standoff over renewing a much broader package of tax cuts could doom it. Democrats want to make renewing the Bush tax cuts contingent on raising income taxes for people earning $250,000, while Republicans are adamantly opposed to anything that raises taxes above current levels.

Unless Congress acts to extend this tax credit, on Jan. 1, 2013, the only credit for adopting will apply to parents who take in special needs children from within the U.S. — and that credit will be for just $6,000.

The adoption tax credit, which adjusts annually for inflation, is $12,650 this year, down $710 from 2011. But what really hurts families with big hearts and tight budgets is that the credit is no longer refundable, according to That means it can help lower the tax bill, but once expenses are covered no excess credit can be claimed as a tax refund. That especially hurts poor families who may have little or no tax liability.

The National Council for Adoption wants to not only save the credit, but make it refundable, as it was in 2010 and 2011.

Joe Kroll, executive director of the North American Council on Adoptable Children, cited the case of the case of Todd and Mary Hankel, of St. Croix Fall, Wisc., as an example of how important it can be to be able to claim adoption expenses as a refund and not simply a credit. When seven siblings from a troubled Twin Cities family were put up for adoption in 2006, the Hankels stepped forward to adopt all seven in order to keep the kids together.

They were able to carry forward the tax credit against their expenses — which included building an addition on their house — until 2010, when the tax break became refundable and they got a check that helped them pay off a mortgage for the addition.

The Hankels are not wealthy, said Kroll, and neither are most people who make the decision to take in foster children.

“When you look at the numbers, you see that folks under $100,000 make up the bulk of the adoptions,” Kroll said. “It’s stunning how many families at lower income levels are adopting children.”

That’s why Kroll wishes the heated political debate about the Bush tax cuts did not include an incentive for helping otherwise helpless kids.

“I wish the discussion of all the different taxes did not include this particular tax issue,” Kroll said. “It is support to families that are adopting, and doesn’t belong in the political mix.”