October 2, 2008 12:00 am

New Foster Care and Adoption Act

The Fostering Connections to Success and Increasing Adoptions Act of 2008 has passed both houses of Congress and has been sent to the White House for the President’s signature, which is expected shortly. This new law is aimed at moving more children from the foster care system into adoptive homes, allowing more children to be cared for by their grandparents or other relatives, and creating opportunities for older children aging out of the foster care system. For example, the law allows states to continue financial support for children in foster care who are pursuing education or training up to age 21.

The law requires states to inform parents who are adopting a child or considering adoption of a child from foster care of the benefits of the adoption tax credit. In 2008, the federal income tax credit is up to $11,650. Those adopting a child with special needs can claim the credit without regard to their out-of-pocket expenses. However, the credit cannot be claimed by those with modified adjusted gross income (MAGI) over a threshold (full credit for MAGI up to $174,730, partial credit for MAGI over $174,730 and $214,730, and no credit for those with MAGI of $214,730 or more).

Tax Glossary

Simplified employee plan (SEP)

IRA-type plan set up by an employer, rather than the employee. Salary-reduction contributions may be allowed to plans of small employers set up before 1997.

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