Big headache in subsidy questions......

The children with subsidy that live in your home can be claimed as your dependant regardless of your expenses vs. subsidy amount. You provide those childrens physical day to day care. this is not the same rule as the divorce/support thing.

lucyjoy, that contradicts information I have in writing from my agency. Can you direct me to anything in print or on the Web that says what you just did? (We all know social workers can make mistakes when it comes to tax information--I'd like your version to be right!)

The federal IRS tax booklet under what classifies as a depenant which clearly states that any child placed in your home for the purpose of adoption or any adopted child. I also called them and asked them about claiming the money. Custodial parents also do not claim child support received for children as income.(who claims them is affected by different factors). There's no way to figure out how much it cost you to raise your child per month. How much water did they use? How much electricity? These are all part of the expenses. That would be ridiculous(I mean the rule, not what you're asking). I'm not a lawyer, but I spent a lot of time researching the IRS rules and talked to several IRS people at their office. You do have to claim subsidy(and child support income) on school lunch forms and things that ask about child support income.

Okay..... Lucy, I always thought exactly what you have stated. When we adopted our first older child over seven years ago; then adopted the sib group two years after that, we were told over and over again that the subsidy IS NOT taxable. However, another mom posted on another site about the 50% deal. I agree completely, how in the world would anyone be able to document each individual cent a child uses. And......in our case, this would vary year to year. Last year, we homeschooled part of the year.....he took dance classes for six months, etc. The youngest son's stipend is very small and I have no question that we provide over 50% of his support. However, it's this one son who still lives at home. I checked on the website of the NACAC....subsidy fact sheet. NACAC..(North American Council on Adoptable Children). They state the 50% deal too.....and further state that the IRS has a worksheet for parents to use to determine if they support over 50%. In his case, I don't think we do. His past foster mother was able to get a HUGE stipend for him, claiming he had every single condition under the sun. (In fact, it was thought that she had .....pardon my spelling......Muchausan's By-Proxy syndrome....and yes, I KNOW I spelled it wrong...but don't want to take the time to look it up.) So, with this in mind, I'm running a little scared. However, I also know that if he goes to private Christian school next year (which we've discussed).........there won't be any question that all of this stipend will be used to support him. The NACAC states: "While the subsidy itself is not taxable, part of it could possibly be taxable if the adoptive family cannot demonstrate that the child's support was a least in excess of the subsidy amount. In such an instance, subsidy funds in excess of teh amount of support would be taxable." What's everyone's take on this???? Thanks in advance.... Linny

I reread my 2002 income tax book, but I still think the 50% refers to adults in your home or children of divorced parents and guardianship placements. like I said, I did call the IRS and ask them and they weren't sure and went trough about 8 people before telling me it was not taxable and they were dependants. I think I'll find the foster care form 501 something and see how that's handled. I'm not real concerned because my children's subsidy is not as high as their difficulties and expenses. NACAC is usually pretty well informed, so now I'm really curious.

We were told that when determining how much money you spend on a child, that we were to take such "large-ticket" items as the house and utilities and car payments, and simply divide by the number of people in the house. So, a $1,000/mo mortgage payment with 2 adults and 3 kids would equal $200 per month per occupant. Same with the other "household" bills. Then add in the child's clothing and private lessons and school lunches and expenses for medical and counseling appointments, etc. Basically, we were told that the tax issues for an adopted child with a subsidy were very similar to the tax issues for a foster child in your home. When the child is a foster child every dime spent on each child (over the subsidy allotment) counts as a charitable deduction, so parents who foster-adopt are already used to keeping receipts and counting pennies. I don't yet have a placement, so I hope the obvious confusion within the IRS will be cleared up by the time I do. Linny, if you do get audited, make sure you come back and post how they say you should have done it! ;)

I don't see how foster payments and adoption subsidy can be treated the same. when my 13 year old was arrested, I had to pay his lawyer, had he been a foster child, I would not have been the one paying. In another posting on this forum, an adoptive parent is being held financially responsible for child support on a former adopted child that disrupted. If this were a foster child, this would not occer. How can an adopted child not be a dependant? when I stood in court I took total responsibility for my sons as if they were born to me and my responsibilities are the same for non subsidy and subsidy kids. Is the IRS gonna let me deduct the holes in the wall etc? Now I'm more curious and need to do some serious research. This really bugs me.

And yes, you read correctly,........it got WORSE! After trying to figure if the one son was more than 50% supported by us.....and realizing he wasn't......we decided that 'we could not claim him as a dependant. H and R Block agreed with our reasoning. I realize that no one would probably have known......but it was eating on me like crazy! So.......I thought....okay. This is still alright.....we lost over $1,000 of refund because of this......but.......'that's okay'..........cuz we'll get some back on the ADOPTION TAX CREDIT.....RIGHT?!?!?!?! WRONG! In our case, my hubby has the maxium amount taken out of his paycheck. So, we know that pretty much, we overpay each year. However, I was under the impression that if our tax was " 0 "...then we would be getting almost all.....if not all.....of the amount back that we paid for our private adoption last year. WRONG!!!!!! I asked them to explain it to me over and over because by this time, I was almost in tears....literally! We were SO counting on getting at least a portion of that money back to help with the next adoption! NOT SO! Basically, we weren't able to 'use' any of that credit, because our tax was already ZERO.............that 'tax credit' is only used to 'reduce the tax you may owe........PERIOD. I am SO BUMMED.......SOOOOOOOOOOOO BUMMED! I found out tonight that we can borrow the money from one of our parents......but this isn't the point. I started thinking about how the agencies are charging more and more because THEY think we will get a portion if not all of that money back! EVEN our adoption attorney told me this. NOT SO. HOWEVER.........if we made $60,000 or so, meaning, if I worked too, if we put our kids in daycare often enough and then applied, it would very likely be that we would get a portion or all of that money back. So, (and I tend to be a republican folks).........for those of us who are basically 'poor and trying to 'do right'.......there IS no money back. I only wish that I had prepared myself for that before I went in. I felt SO SORRY for myself when we walked out of there.....I could barely stand it. And.....I also felt sorry for those adoptive couples who don't have relatives who can lend the money when they need it. Furthermore, I called the SSI people again. They double checked everything and told me, "we don't care what you do with the money'. Now. It was suggested to put the money in savings bonds, etc. for our son later on......but the chances are INCREDIBLY high that he is going to be institutionalized for the rest of his life. I don't want to save money only to send it back to the gov't. He cannot accumulate $5000. , or his SSI stops. So, basically, we have all this money on one hand......and can't use it........then (and I know some people will say this is so unethical...but others have told us we should use the money and forget about it)...........then........we want to adopt more children.....but can't use the money we have. Strange world, huh? Anyway, Lucy, the situations you talked about 'foster vs. adopted child'......are correct. Once you adopt, sometimes there is no 'help' for the child........but if the child remained 'foster status'.........the state would easily pay. And, I agree with you.......the child should be a dependent. But, the monies are considered 'reimbursement', as we all know. If we don't use all of the money for the child (and living expenses).....then we are in essense, getting 'free money'. We don't use all of our one son's money because we live very differently. For instance, we don't have heating bills, because our farm has a natural gas well. (This of course, is an enormous savings for us, and therefore, the child can't be a 'user' of the heating bill.) We also don't always have fancy clothes, and I believe in re-sale shops sometimes. It gets too complicated, for certain. And no, I don't think it's fair. Personally, I think the money we get for the son in residential should be 'of no concern'..........it is an emotional toll on everyone here, just to deal with him each week, and sometimes more often. That's probably rude and 'unloving' to say, but it's truth. It's very difficult to love a child that tried to kill others in your family...and admits he'd kill others if he could. Sorry for the length, folks. But.......I'm BUMMED! Linny

I don't consider subsidy reimbursement anymore then I'd consider child support a reimbursement. Even if my cost was less then 50% one year, it could be a lot higher the next year. their not gonna let me claim him twice then. I'm going with what the IRS told me and if they want to audit me they can. I have no doubt I pay 50 % of his care anyway. I hope you're right about your son remaining institutionalized if he remains dangerous. These kids are normally released at 18(21 in some states, some sooner). I see this happen all the time. If you can find away to save it for him without messing up his SSI, I would. He may need it for attorneys or living expenses. We don't make enough to take the adoption tax credit either. Our tax is zero, but we did qualify for the extra child tax credit(I thought we didn't, but the IRS sent me a letter telling me they thought they owed me more money and gave me forms to fill out). I use to be a bookkeeper for 60 stores,(10 years ogo) but this is really getting comlicated.

Linny, Again I'll say how sorry I am that you got shocked like that during your tax preparation. How disapointing. But if I may, can I ask if the subsidy you received during the year for that son amounted to more than the tax break you didn't get? I still think you're probably ending up ahead of where you would be if he didn't have the subsidy. It's just disheartening that you didn't get the additional break of the tax money, also. (And the lump sum would have been so convenient!) Both of you, How on earth do neither of you get to take advantage of the adoption tax credit??? I don't make that much, but I do have around $2,500 per year in federal income tax taken out of my paychecks. Are you guys just saying that you have so many other deductions that the adoption credit doesn't get used? Or do you really not make enough money to pay tax on it? What am I missing, or can you save me from making the same assumptions and getting the same disappointment that you did?

Well Linny, You got me wondering so I went and figured out my taxes. (we are STILL waiting for our newest son's tax id #, so we can't actually file yet). We can't take the credit for 2002 because we haven't finalized yet. But my husband probably won't get a raise this year, I would bet BIG money that he won't! So our taxes won't be much different this year and next. ANyway...no taxes either. We had planned to replenish our savings account with what we were going to get back from the credit. INstead we are going to just have to suck it up I guess. We decided to adopt a child who had been exposed to drugs and alcohol through a private agency. So we had a fee...and we figured it would all work out ok in the end because of the credit. Guess we were misinformed too! We are a 1 income family. It is very important that our newest son have a parent at home. Not only for the bonding aspect...but because i have to spend lots of time each day working with him to overcome his challenges. So we sacrifice the new car, the fancy furniture...heck, I haven't had a hair cut in 2 years! We do well enough. Our kids have everything they could ever want. But we don't have a lot of money. I have said for a long time that adoptions are set up for people who are wealthy. The fees are extreme...and now it seems the tax credit is only for people with higher incomes as well. Why is it that an adoption tax credit is such a great thing. Why can't we use the money related to the credit and give federal grants? Take the class system out of being an adoptive parent!

I am so sorry for what you are going through. Especially the sacrifices you are making to take harder kids! People like you shouldn't be stiffed by the government. When we adopted our kids they made us sign a document that said if our kids ran away or where placed in residential treatment that thier subsidy/medicaid would be discontinued. Is that not the case with your son? Don't feel guilty for having the feelings you do about your son. I think you have great motherly instinct's which tell you to protect the rest of your family by hardening your heart to one who not only threatened to do harm but actually tried to do harm to the rest of your family. Just make's me wonder what type of hell he lived prior to your home? Poor KID! Take care and chin up. If it were me I would use the extra money to donate to the facility he is in in his name. Maybe they could put it to good use, and he would directly benefit.

"When we adopted our kids they made us sign a document that said if our kids ran away or where placed in residential treatment that thier subsidy/medicaid would be discontinued." I would never sign an agreement that said that nor was I ever asked to. Is this something new or state by state?

I have to say THANK YOU to everyone who is being supportive to me----especially when I wrote that post feeling so down and emotional! (You should see how this line is going on the 'adoption tax credit' forum.......some people are using the topic to really bash adoptive parents!) Let me clarify something. The son who is in RTC IS NOT the one for which we had anticipated a tax credit. He was adopted seven years ago, was in our home for four years, has been in one RTC for three years, and was recently moved (at their request) to another RTC out of state. The child for which I misunderstood the tax credit, is through an agency/attorney.........an infant. After our experience with the one son, even though we have had two successful older adoptions, we just didn't feel we could take a chance again. I know infant adoption carries 'risks' with it too, but our lives were horrible while he lived in our home. That said........the 'signing of something if a child ran away, etc......no stipend would be paid.' We never signed anything like this. We are VERY BLESSED, indeed. I worked very hard (as 'the system' surely wasn't going to admit that they committed fraud......we have it in black and white)........and our son is 'supported' in room and board by a care grant through the state. (We supply clothes, shoes, needed items, etc) I have no qualms about this. However, the RTC insisted we apply for SSI for him. This is fine as the money goes directly to his RTC for him. However, he cannot make more than $5,000 or the state will take away his SSI. It matters not if we can put it in a savings bond, fund, etc. for him as non-taxable for us.....because if he ever could 'cash it in'..........it will be more than that and cause him to lose his SSI. I actually called the 'adoption assistance' people to state that I thought the stipend would be reduced.......early on, I called to state that I thought the stipend should be discontinued. I have no idea how responsible we are once he turns 18. At this point, we feel he has done much damage to our family and cannot feel that we should be in any way responsible to him....... If he continues to be institutionalized (which is what the previous RTC has stated over and over.....and we agree).......then the gov't will simply 'take the money' anyway to use as payment toward the institution. I think I might have a problem with that. We've been given all kinds of suggestions.....everything from (and this came from our therapist as well).....using it for the next adoption.....donating it to a facility or scholarship, etc. It's just that small inkling of thought that 'what if he ever WOULD need it for himself'...............I don't know. We're planning to seek professional advice on it. I know we're not the only ones to have been in this situation. Again, I'm thankful that everyone who has posted has understood me. I hope some can learn from my assumptions. Sincerely, Linny

Linny, I'm not really familiar with SSI stipulations, but...Is the $5,000 cap for income or does it include gifts? Would it be possible for him to receive "gifts," whether cash or other, in lieu of an income and still qualify? Just a thought.