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Committee House Approves Adoption and Foster Care Tax Credits

On May 9, the House Ways and Means Committee approved, by voice vote, a bill (H.R. 622) that would expand tax credits for families who adopt a child. The committee also approved, by voice vote, legislation (H.R. 586) that would increase tax exemptions for foster care families.

Sponsored by Rep. Jim DeMint (R-SC), H.R. 622, the Hope for Children Act, would double both the adoption tax credit and the employer adoption assistance exclusion to $10,000 and make them permanent law. Under current law, up to $5,000 in adoption assistance provided by an employer may be excluded from an employee’s taxable income, and families who adopt a child may take a $5,000 tax credit; both provisions are scheduled to expire this year. The bill also would increase the tax exemption for special needs children, permanent under current law, from $6,000 to $10,000. Families earning $150,000 or less would qualify for the full adoption credits.

Under current law, foster care families are allowed to exclude from taxable income the payments they receive for additional expenses incurred while caring for a foster child. Sponsored by Rep. Ron Lewis (R-KY), H.R. 586, the Fairness for Foster Care Families Act, would expand and simplify the types of foster care payments that are eligible for exclusion. The bill would allow exclusions for foster care payments if the arrangements and payments are made by an agency that is licensed or certified by the state.

A similar adoption tax credit was included in the President’s tax cut proposal.

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