Giving “Special” Credit To Adoptive Grandparents

Written by Peter Tran

July 1, 2017

Several weeks ago had the honor of speakng at a meetng of RAPP, Relatves as Parents Program. RAPP s a support group for the growng number of grandparents who are rasng ther grandren. Accordng to AARP, more than 2.5 mllon U.S. ren are currently beng ras by ther grandparents.

What s behnd ths trend? Unfortunately, an ncreasng number of grandparents are rasng ther grandren because the parental rghts of ther own ren have been sever by the state, largely due to abuse and/or neglect. Many have legally adopt ther grandren, some many years ago, and are not aware of the fact that these ren have been certf as ren wth “specal nes” (a phrase whch has nothng to do wth any form of physcal, emotonal or learnng dsablty).

Ths s why was vstng the RAPP meetng – to share some major changes made to the Adopton Tax Crt for 2010 and 2011, changes that have result n tax refunds of well over $10,000 per adopt and an uneect fnancal wndfall for those adoptng ren wth “specal nes.”

n today’s column wll dscuss the Adopton Tax Crt and ren that meet the RS defnton of “specal nes.” wll also dscuss the uneect fnancal wndfall adoptng these ren cr for these grandparents and, fnally, why tme s runnng out on clamng the crt.

The Adopton Crt remburses adoptve parents of elgble ren for qualf adopton s up to specf lmts. For those adoptng “specal nes” ren, however, the crt amount s aval for each regardless of any s pad by the adoptve parents.

Pror to 2010, the Adopton Crt was “nonrefund” – meanng t would ruce tax lablty but would not generate a refund. Although any unus crt could be carr forward, t was lost f not us wthn fve years. Because the crt was not refund, many adoptve parents saw lttle beneft and dd not clam the crt or carry t forward.

The Changes: For 2010 and 2011 ONLY, the Adopton Tax Crt was made refund – adoptve parents can receve the crt even f they owe no ncome tax. Ths refund-ablty also apples to any crt carr over to 2010 from a prevous tax year. The amount of the crt was $10,630 per adoptve n 2005, an amount that ncreas each year to reach $13,360 for 2011.

The Adopton Crt and “Specal Nes” ren: To qualfy for the crt/excluson, the adoptve must be an “Elgble ” or a “Specal Nes .” An “elgble s ether under the age of 18 or a person physcally or mentally un to take care of hs or herself. A “specal nes ,” s defn as an elgble who meets three tonal crtera: (1) The s a ctzen or a resdent of the Unt States or U.S. possesson. (2) A state agency must determne that the should not or cannot be return to ther parent’s home. (3) The state must also determne that a specfc factor (such as the ’s age, ethnc background, mcal condton or handcap) makes adopton unlkely wthout assstance. f your qualfes as specal nes t should be clearly stat n the “Adopton Agreement” recev from the state.

Wndow closng to clam crt: f you overlook the Adopton Crt on your orgnal return the only way to clam t now s to amend the adopton-year’s return and all years requr to carry the crt forward to 2010. Snce the adopton crt can be carr forward fve years, adoptons of specal nes ren from 2005 and forward can stll qualfy for refunds n 2010.

Unfortunately, however, the wndow of tme s closng to clam the Adopton Crt. Taayers only have three years from a return’s due date to clam a refund. Ths means that the ablty for most to carry forward and clam the Adopton Crt on 2010’s ncome tax return wll only be aval untl Aprl 15, 2014.

n today’s column, have dscuss a potental fnancal wndfall for those adoptng “specal nes” ren from 2005 to 2011. have not dscuss many of the crt’s complextes that may mpact your return. As always, do not rely on ths nformaton as a bass to make any fnancal decsons. Feel to contact our offce to consult wth a tax professonal.

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