ADOPTION TAX CREDIT OF UP TO $1,600(Feb. 23, 2005) The federal government today introduced the very measure which opposition party members have sought for years. The 2005 Budget includes a tax credit based on up to $10,000 in adoption expenses and worth up to $1,600. The "Adoption Expense Tax Credit", says the Budget Document, is "a non-refundable tax credit to recognize specified adoption expenses, up to a maximum of $10,000. This measure will be effective as of the 2005 taxation year, and is estimated to reduce federal revenues by $5 million per year." The aim is "to give adoptive parents tax relief for "exceptional costs" which are unique to adoption, including adoption agency and legal fees". The way that Finance Minister Ralph Goodale will "recognize" your adoption expenses is by giving you a credit for 16% of your expenses. That means the most you could save on your 2005 income tax is $1,600 per adoption finalized in 2005. (Since the credit comes into effect in 2005, it doesn't apply to adoptions finalized in 2004 or earlier.) The federal tax credit of up to $1,600 pales in comparison to the one in Québec. Québec's Adoption Tax Credit allows adopters to deduct 30% of adoption expenses. Since maximum expenses allowed are $20,000, Quebeckers can save up to $6,000 on their provincial income tax. Even more generous is the United States, where you get a tax credit of up to US$10,390 for adoption expenses (about Can$12,500). M.P. Jay Hill, who worked hard trying to get an adoption expenses bill passed, said he is "thrilled federal Liberals gave in after a four-year battle". His Bill C-246 sought a federal tax deduction of up to $10,000 for adoption expenses. (A tax deduction lets you deduct expenses from your income, whereas a tax credit is subtracted from the income tax you owe.) Mr. Hill, Official Opposition House Leader and Conservative M.P. for Prince George-Peace River, said in a statement today, “For four years I have been fighting this battle to have the Canadian tax system reflect the tremendous contribution to society made by adoptive parents and adoption in general. To see the overall provisions of C-246 written into the budget is one of the most rewarding moments I have ever experienced as a Member of Parliament. I‘ve always said it didn’t matter whether it was my bill or some form of government legislation that got the job done. All that matters is that the incredible financial burden that adoptive parents willingly accept to give a child a family and a home has been lightened.” For more on Bill C-246, see "Tax Credit Bill", http://www.adoption.ca/news/041020tax.htm. Here are details of the federal adoption tax credit. The credit Adoptive parents may claim up to $10,000 in eligible expenses for any particular adoption. (The amount will be indexed after 2005.) It's a 16% non-refundable credit. When calculating your tax payable, you get to deduct 16% of up to $10,000 in expenses during the "adoption period". That's a maximum saving of $1,600. The adoption period starts when you open an adoption file with your provincial or territorial ministry responsible for adoption, or with a licensed adoption agency. It ends at finalization. "Non-refundable" means that if the credit takes you past the point of owing zero taxes, you wouldn't be refunded any excess. (And if the government owed you a tax refund, then the adoption tax credit wouldn't be worth anything to you.) The credit may be split between two adoptive parents, but combined expenses can't exceed $10,000. Eligible expenses
Adoptions which qualify The tax credit takes effect in the 2005 taxation year. The year in which the adoption order is issued is the year in which you can claim expenses. So for an adoption finalized in 2005, you can claim for expenses dating back to when you opened an adoption file with a government or private adoption agency, even if they were before 2005. An adoption finalized in 2004 or earlier wouldn't qualify, and you couldn't claim for any expenses. You must submit proof of an adoption in the form of a Canadian or foreign adoption order, or otherwise show you've met all the legal requirements of the jurisdiction you live in. Follow-up A summary of the adoption tax credit
is at "Supplementary
Information", The wording to amend the Income
Tax Act is at "Annex 8 - Tax
Measures", Sunrise Family Services Society
in British Columbia is following developments in how the tax
credit will be interpreted by Revenue Canada; ABOUT ACCBased in Ottawa, the Adoption Council of Canada is a federally chartered, charitable organization which aims to inform and educate Canadians about all aspects of adoption, and encourage the adoption of children needing permanent homes. One of ACC's long-standing goals has been to recruit adoptive families for waiting children across Canada. In 1997, six years after becoming incorporated, ACC earned its first grant from the Dave Thomas Foundation for Adoption (www.davethomasfoundation.org) and Wendy's Restaurants of Canada, which made the Canada's Waiting Children program (and the "Canada's Waiting Kids" web site, www.canadaswaitingkids.ca) possible. Thanks to their ongoing support, ACC has been able to devote considerably more time and effort to finding families for Canadian children without a permanent home. There are thousands of children right here in Canada who need permanent homes. To find out more about adopting in Canada, consult Canada's only national photolisting web site, "Canada's Waiting Kids", run by the Adoption Council of Canada. It shows photos and profiles of children in the care of Canadian child welfare agencies and waiting for permanent adoptive families. For a description of how the web site works, see "Canada's Waiting Children Program Finds Permanent Homes For Kids." For definitions of adoption terms, go to http://www.adoption.ca and click "Glossary". Source: Adoption Council of Canada, www.adoption.ca Copyright 2005 Adoption Council of Canada. Reproduction permitted, if credited "Source: Adoption Council of Canada, www.adoption.ca". Please make a request to reprint, so we can track where ACC news items are used. Send your request to acc@adoption.ca. |
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