Archives for March 2021

About the Adoption Tax Credit for the 2020 Tax Year

Breaking Down the Adoption Tax Credit for 2020 Tax Returns

Although you can’t legally get out of paying taxes, you can qualify for tax credits that reduce your total tax load. For the 2020 tax year, the IRS allows adoptive parents to deduct qualified adoption expenses of up to $14,300 per child. Rather than passing up free money, you should learn how to qualify for the Adoption Tax Credit for the 2020 tax year.

What Does the Adoption Tax Credit Cover?

Although the IRS wants to help adoptive parents, the federal agency doesn’t allow you to deduct any parenting expenses. Rather, the Adoption Tax Credit only covers two types of tax dollars:

-Adoption assistance income provided by your employer.

-Expenses used to initially adopt an eligible child.

Eligible children include people who are unable to care for themselves and those who are under 18 years of age.

Some of the most common types of qualified adoption expenses include:

-Adoption-related court costs and adoption fees.

-Meals, lodging, and other travel expenses qualify assuming that you travel to adopt your child.

-Fees paid to New Jersey adoption lawyers.

Are There Any Expenses That Aren’t Covered by the Adoption Tax Credit?

Many spouses enter marriages with children from previous marriages or relationships. Oftentimes, the other spouse petitions the court to become an adoptive parent. In addition to offering sentimental value, this measure may offer tax benefits — but not under the Adoption Tax Credit. The IRS prohibits taxpayers from claiming the Adoption Tax Credit for adoptions involving their spouses’ children.

Funding that comes from any government programs, including those at the local, state, and federal levels, can’t be claimed as qualified adoption expenses under the Adoption Tax Credit.

Some employers and organizations reimburse adoption expenses. Although not nearly as common, loved ones or other individuals may also provide reimbursements for adoption costs. Neither of these can be included under the Adoption Tax Credit in 2020.

Lastly, qualified adoption expenses don’t cover adoptions related to surrogate parenting agreements. Of course, you also can’t take deductions for expenses that are covered by other tax credits or that violate any laws.

Can You Get Money Back on Your Tax Refund for the Adoption Tax Credit?

Tax credits can generally be split into two categories: refundable and nonrefundable. Assuming you have no additional tax liability, which means you won’t have to pay any additional money out of pocket when you file your tax return, qualifying for refundable tax credits means that you’ll get additional refund money. Refundable tax credits, for example, include the Earned Income Tax Credit and the American Opportunity Tax Credit.

Nonrefundable credits, on the other hand, can only reduce your tax liability. Even if you don’t have a tax liability, you won’t receive a payment from the IRS for these nonrefundable credits.

Unfortunately for you, the Adoption Tax Credit is totally nonrefundable. Although not as attractive as refundable tax credits, you can still take advantage of the Adoption Tax Credit.

Do You Exceed This Income Level? You Might Not Qualify.

Many tax credits have phaseouts that prevent well-paid taxpayers from qualifying for them. This is true for the Adoption Tax Credit as well.

In 2020, this phaseout begins at a modified adjusted gross income of $214,520. If you’ve earned more than $254,520, you won’t qualify for the Adoption Tax Credit at all.

Don’t Risk Losing This Opportunity — Get Professional Help With Qualifying

Although tax-preparing software has grown to replace the roles formerly filled by many accountants, these websites and computer programs can’t replace insight from a skilled New Jersey adoption lawyer such as Donald Cofsky of Cofsky & Zeidman — we’re waiting to hear from you. Headquartered in Haddonfield, New Jersey, Cofsky & Zeidman can help you plan out adoption expenses ahead of time to minimize your tax load. Call our Haddonfield location at (856) 429-5005, or if you’re located a little farther south, give our Woodbury office a ring at (856) 845-2555.

Common Hurdles Unmarried Adoptive Parents Often Face

The Struggles of Adopting as a Hopeful Single Parent

Prospective adoptive parents who are single often worry that they’ll be overlooked in favor of married couples. Despite this common concern, unmarried people were responsible for roughly one-third of all U.S. foster care adoptions in 2011. Even with positive facts like these, it’s easy for a hopeful adoptive parent to get discouraged.

Challenge: Not Having a Support System

As social creatures, having a solid support system is directly related to general life success. Outside of helping us through tough times, support systems give us more friends and greater satisfaction in life.

Adoptive agencies usually perform home studies to see how you might fare as an adoptive parent. One thing they’re going to inspect is your support system.

Solution: Building Rock-Solid Relationships

Building relationships with friends, co-workers and peers isn’t an overnight process. Fortunately, however, consistently showing support to others over the long run will undoubtedly result in strong relationships. If you’re not sure where to start, joining clubs, churches and other organizations is always a good first step.

If you’ve already got enough relationships, make sure to communicate your concerns about adopting when single. True friends will show their support, giving you a sense of who you can count on.

Challenge: Financial Stressors

People get married for many reasons, including having children and financial stability.

One study from Ohio State University found that married couples tend to generate more wealth than their single counterparts. One 2005 study showed that, after a decade of marriage, single participants reported having a net worth of $11,000, which was nearly four times as small as married participants reported net worth of $43,000. Even after doubling the single participants’ net worth, $22,000 still pales in comparison to $43,000.

Although having two household income streams can improve financial stability, countless married couples still struggle with debt and overall financial management.

Solution: Cultivating Financial Stability

Every adoption agency is different. While yours might not, many agencies do consider hopeful parents’ personal finances.

Proving long-term financial stability is unarguably the best way to resolve your concerns about finances as a single parent. Even if it takes a few years, consider putting your adoption efforts on the back burner to improve your financial situation.

Before applying, make sure you have enough in savings to pay for living expenses for several months should you lose your job or get injured. Also known as an emergency fund, this account should contain enough cash to completely cover three to six months’ worth of household expenses.

Qualifying for adoption grants and loans could also help someone. In addition to making your parental prospects more attractive, financial aid could make your experience much easier. If you have already tried to apply and haven’t had much success, a New Jersey adoption attorney could help you by strengthening your existing application and helping you avoid common adoption application pitfalls.

Challenge: Workplace Woes

Parents, both adoptive and biological, often expend substantial financial resources paying for day care or babysitters. Although most working parents, especially single ones, will need to pay for child care services at least intermittently, careful planning can limit your reliance on third-party child care.

Solution: Finding a Flexible Employer That Values You

The more value you provide to employers, the better they’ll treat you in return. As long as you show your true worth in the workplace, you shouldn’t have trouble finding a flexible employer. Still, some managers or business owners won’t recognize value when they see it.

Before applying for adoption, try finding a job that offers plenty of flexibility. Holding down a job like this for several years before going through with a single parent adoption can pay off big time in the long run.

Need Help? Look No Further

Parenting isn’t supposed to be easy. As a hopeful adoptive parent, however, parenting can seem especially difficult. Whether you are just now thinking about adopting or have already had success as an adoptive parent, seeking help from a New Jersey adoption attorney can help.

If you are single and want to adopt a child, let our team at Cofsky & Zeidman help. Attorney Donald C. Cofsky has spent much of his career advocating for adoptive parents in the Garden State and across the country. In fact, Mr. Cofsky is the former president of the Academy of Adoption and Assisted Reproduction Attorneys, one of the country’s leading legal voices on adoption.

You can contact Cofsky & Zeidman’s main office in Haddonfield, New Jersey, by calling (856) 429-5005. If you’re closer to Woodbury, feel free to call our Woodbury office at (856) 845-2555.

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