Adoption Credit/ Payments

[geekgirldany]

I have a customer that will be adopting her niece in 2008. Because her niece is over 13 years old and has been in foster care. The state will be paying the aunt so much per month to take care of the child. She is wanting to know if these payments are taxable. I believe they are called Adoption Assistance Payments. She was not sure. I don't think they will be taxable because they are supporting the child but I want to make sure.

Also because the state has recognized the child as a Special Needs... am I understanding correctly that in 2008 they can get the Adoption Credit of $10,960 even if there is no expenes?

Thank you

[oceanlovin'ea]

Not taxable.

Those payments people receive while taking care of a child pending adoption are not taxable.
They do get the adoption credit even if there are no expenses. If they don't use it all in 2008, they can carry it forward.

A real nice bonus for people who are willing to adopt a special needs child, which by the way can mean that they are an older child or have siblings that are also in foster care. It doesn't mean they have to challanged in any way.

Have had 2 different clients in these circumstances.

Linda F

[geekgirldany]

Thanks so much.
Yes she is an older child. My customer also adopted her other niece. Good person.