taxes for CPS adoptions

If they have been in your home the entire year of 2002 then they will qualify as your dependants for tax purposes and you can claim their exemptions. The reimbursement from the state for your adoption expenses is not taxable as long as it is not more than your expenses (and remember, you can include adoption agency fees, court costs, attorneys fees, travel expenses including food and lodging, etc.) In the year that your adoption is final you will be able to take the adoption credit (if you have expenses that were not reimbursed). Apply what you were reimbursed and then you can take the rest towards your adoption credit. Any of their medical expenses that you were not reimbursed for can be taken on Schedule A in your family's total medical expenses. You can email me at Pribacdist@msn.com if you have any more tax questions (I'm a tax preparer). Congratulations on your pending adoptions! I know that your only thoughts aren't about money, it sounds like you've been through the "rough" part of adoption and are now on the mundane issues we all worry about as parents--and money and taxes is a definite issue we all worry about!! Best of luck. Leah

I have not been able to find anywhere where the definition of "special needs" is spelled out in the federal tax credit information. It seems to depend on whether or not your STATE considers them a special needs placement or not. Since you'll be receiving a subsidy for them after adoption, I imagine they fit your state's definition. Also, as far as I know, IF your children are indeed considered special needs, you get the full federal tax credit, even if you had no expenses or if the expenses were reimbursed to you. But check to be sure, you don't want to claim it and then have it not apply. (Also, read my post below: "Are tax credits per adoption or per child"--the jury seems to still be out on that as well!) As far as I know, adoption subsidies are not considered taxable income. But that may vary by state as well. Check, check, check, and check again! You can't check too many times when you're talking about that much money. Good luck!

If the children are considered special needs, why are you paying any adoption expenses? I did five state adoptions and never paid a dime. According to the IRS when I called them, adoption subsidy is not taxable.

Leah, In answer to your question regarding your children as dependents on your 2002 taxes, I copied the following directly from the IRS website. A child placed in your home for adoption is a dependent, even if it was for only a part of the year. Qualifying Child A qualifying child for purposes of the child tax credit must be all of the following. 1. Under age 17 at the end of 2001. 2. A citizen or resident of the United States. 3. Claimed as your dependent. 4. Your: a. Son or daughter, b. Stepson or stepdaughter, c. Adopted child, d. Grandchild, or e. Eligible foster child. Example. Your son turned 17 on December 30, 2001. He is a citizen of the United States and you claimed him as a dependent on your return. He is not a qualifying child for the child tax credit because he was not under age 17 at the end of 2001. Adopted child. A child placed with you by an authorized placement agency for legal adoption is an adopted child even if the adoption is not final. Hope this helps! MSB

lucyjoy, don't forget that "adoption expenses" can include travel necessary for the adoption to be complete! Fill out mileage charts to and from the courthouse and you then have legitimate adoption expenses. You can also include any lodging and meals needed for an extended trip somewhere that is necessary to the adoption. According to my agency, any alterations I need to do to my house that are required by the homestudy are adoption expenses as well (for me, that would be a second fire extinguisher). Here, adoptive parents of special needs children have to pay the $125 final court documents cost, and that's all. But all the "incidentals" add up to a bit, too.

I hadn't thought about the mileage, but my subsidy covered beds, travel, cameras, alarms and all court fees. I'm sure this varies by state and I should have thought about that. For one adoption, he worker actually asked me what all I would need to take that child. I also was careful not to ever ask for more than I thought a child would need so funds would be there for others.