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  Tax credit: government comes through (barely)
Family Helper editor

(Feb. 23, 2005) The federal government's budget today introduced an adoption tax credit. It's based on up to $10,000 in adoption expenses and worth up to $1,600. But it won't help you on your 2004 tax return, unfortunately -- the tax credit starts in 2005 ... you'll have to wait until you do your 2005 taxes to make a claim. Also, it wouldn't benefit those who finalized an adoption in 2004 or earlier. The main points:

* The 2005 Budget offers tax relief for adoption expenses by giving you a tax credit, which is subtracted from the tax you owe. (It's not a tax deduction -- letting you deduct expenses from your income -- which is what Jay Hill was promoting.)

* You may claim up to $10,000 in eligible expenses for any particular adoption and get a 16% tax credit.

* You could save at most $1,600 per adoption on your 2005 income tax. (This applies to both domestic and international adoptions.)

* 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. (So it could cover expenses in 2004 and earlier.)

One point missing from the early news reports is the stinginess of a federal tax credit of $1,600. Québec's Adoption Tax Credit gives adopters credit for 30% of adoption expenses, and since maximum expenses allowed are $20,000, Quebeckers can save up to $6,000 on their provincial income tax. The provisions are even more generous in the United States ... you get a tax credit of up to US$10,390 for adoption expenses (about Can$12,500).

For details on the eligible expenses and adoptions which qualify, see my story for the Adoption Council of Canada, "Adoption Tax Credit".

Doug Chalke of Sunrise Family Services in B.C. is following exactly how the tax credit will be interpreted by Revenue Canada. See his analysis at

If you want to read the original budget documents ...

* Summary of the adoption tax credit ... "Supplementary Information"
* Wording to amend the Income Tax Act ... "Annex 8 - Tax Measures"


Jay Hill, the member of Parliament who has worked hard trying to get a tax credit bill passed, said he is "thrilled federal Liberals gave in after a four-year battle". His Bill C-246 would have allowed adopters to deduct up to $10,000 in expenses from their income.

In a statement today Mr. Hill, Official Opposition House Leader and Conservative M.P. for Prince George-Peace River, said, "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 background, see (Oct. 20, 2004) Tax credit bill: expenses up to $10,000.

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Contact: Robin Hilborn,
Box 1353, Southampton, Ont. N0H 2L0 Canada
Copyright 2009 Robin R. Hilborn
Updated Mar. 22, 2006

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