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Adopting a Kid for Tax purposes?
Old 03-02-2016, 08:59 AM   #1
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Adopting a Kid for Tax purposes?

As I go through my taxes, I realize there are a ton of tax breaks for families. Child care Tax credits, children as dependents, adoption credits, head of household, etc.

If a person was to adopt a child in an underdeveloped country, and pay the birth mother to raise it, could there be a financial windfall from a tax savings standpoint? Forget about any ethics, this is a simple question about tax savings, no different than a company doing an inversion.

Some stipend could be sent to the mother to help raise the child, and the sender would get the tax write-offs. They would never have to see the kid, and if it became more expensive than the tax credits and deductions, they could give the kid back.

I know that even $5 a day is a lot of money for some families in third world countries. Sending $1,000 a year to the mother might be well worth the tax savings. Multiple kids with the same mother could possibly be worth even more as you would have a volume savings.

https://turbotax.intuit.com/tax-tool.../INF12053.html

Could this actually work?
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Old 03-02-2016, 09:24 AM   #2
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Is this a serious question or are you poking fun at our tax code. I've never understood why people with kids get such special treatment...back in the day we just got a standard deduction for each kid, not all the extra stuff you get now.

The answer to your question is that each child claimed as a dependent must have an SS number... so no it wouldn't work.And adopting a child in a foreign country is a very expensive and sometimes impossible endeavor. However you could just support the charity and have a charity write off. Let us know how much you donate to improve the life of these children.
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Old 03-02-2016, 09:27 AM   #3
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I looked into this a bit, only a bit, out of curiosity, myself a few years ago and decided that potential liability outweighed the tax savings, same with similar marriage concept.
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Old 03-02-2016, 09:30 AM   #4
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If it became more expensive than the tax credits and deductions, you want to "give the kid back"?
I really hope you're not serious here, because it's funny as humor, not so much the other way
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Old 03-02-2016, 09:41 AM   #5
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Could this actually work?
Can you give us a reference to a program somewhere in the world that actually allows and enables a legal adaption where the child remains in his or her current (tragic) circumstance?

The situation you are describing sounds like a typical charitable contribution.
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Old 03-02-2016, 09:48 AM   #6
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Can you give us a reference to a program somewhere in the world that actually allows and enables a legal adaption where the child remains in his or her current (tragic) circumstance?

The situation you are describing sounds like a typical charitable contribution.
Maybe a country could be created? An oil rig off the coast in international waters? Or working with a foreign government that got its fair share too.

The child's life would not be any worse than what it would be anyway. It would actually be better.

It would be a similar to a charitable contribution, but would have exponential benefit from a tax perspective.

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If it became more expensive than the tax credits and deductions, you want to "give the kid back"?
I really hope you're not serious here, because it's funny as humor, not so much the other way
The kid(s) would never leave their mother. They may not even know.
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Old 03-02-2016, 09:50 AM   #7
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Originally Posted by ivinsfan View Post
Is this a serious question or are you poking fun at our tax code. I've never understood why people with kids get such special treatment...back in the day we just got a standard deduction for each kid, not all the extra stuff you get now.

The answer to your question is that each child claimed as a dependent must have an SS number... so no it wouldn't work.And adopting a child in a foreign country is a very expensive and sometimes impossible endeavor. However you could just support the charity and have a charity write off. Let us know how much you donate to improve the life of these children.
It may be an interesting business idea. Maybe a Shark Tank proposal.

An SSN can be received with the birth certificate or adoption papers. It would not be a huge obstacle.
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Old 03-02-2016, 09:52 AM   #8
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I can appreciate your question in that it identifies some of the absurd rules in our tax code. What is especially angering to me is direct tax liability credit vs adjusted income credit.
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Old 03-02-2016, 09:54 AM   #9
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Just clicked on a link from the one you provided.... and got this...

Do they live with you? Your child must live with you for more than half the year, but several exceptions apply.

You would need to look up the exceptions to see if they qualified, but I bet you that if you were audited you would lose that exemption and I also would think there is a possibility of you being charged with tax fraud....
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Old 03-02-2016, 09:57 AM   #10
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OK.. you spend the time.... here is a link where you answer questions to get the answer you are looking for...


https://www.irs.gov/uac/Who-Can-I-Cl...a-Dependent%3F



Edit to add.... NOPE, cannot claim them as a dependent....
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Old 03-02-2016, 10:11 AM   #11
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Just clicked on a link from the one you provided.... and got this...
Do they live with you? Your child must live with you for more than half the year, but several exceptions apply.

You would need to look up the exceptions to see if they qualified, but I bet you that if you were audited you would lose that exemption and I also would think there is a possibility of you being charged with tax fraud....
According to the questionnaire, "You can claim kid1 as a dependent."

I had friends that went to Boarding schools. They came home on holidays and a few times during the year. They were dependents just the same, even though they spent well over half the year somewhere else.

I actually think this is possible, assuming you could get the adoption completed, and get an SSN so the kid is a US Citizen.
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Old 03-02-2016, 11:05 AM   #12
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Old 03-02-2016, 11:16 AM   #13
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Originally Posted by Senator View Post
Some stipend could be sent to the mother to help raise the child, and the sender would get the tax write-offs. They would never have to see the kid, and if it became more expensive than the tax credits and deductions, they could give the kid back.
How would you even give the kid back? Sure, the kid never leaves the biological parents but they'll probably be able to sue you for child support.
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Old 03-02-2016, 12:05 PM   #14
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Originally Posted by ivinsfan View Post
I've never understood why people with kids get such special treatment...
Like I wonder why us single folks have a smaller company contribution for health insurance, have to work late because we don't have to pick up the kids, can't take a sick day because someone else is sick, can't stay home when school is cancelled....
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Old 03-02-2016, 12:20 PM   #15
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there is a possibility of you being charged with tax fraud....
Hopefully that would be the case.
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Old 03-02-2016, 12:26 PM   #16
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Like I wonder why us single folks have a smaller company contribution for health insurance, have to work late because we don't have to pick up the kids, can't take a sick day because someone else is sick, can't stay home when school is cancelled....
You forgot to add that married couples frequently pay higher taxes for the same income than two folks living together but not married due to the "marriage penalty."
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Old 03-02-2016, 12:31 PM   #17
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Think about the liability issues of being a legal guardian with deep pockets.
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Old 03-02-2016, 12:46 PM   #18
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Could this actually work?
Even if it were legal and even if the risks associated with assuming liability for a child could be avoided, I doubt the savings would be worth the effort and potential downsides.

You could easily answer the question yourself by doing a sample tax return assuming you had a child. Remember, some of the tax "benefits" of having a child are only available after you pay the expense. Child care, for example. You only get the deduction after you pay for the care and even then, if your income is very high, it's reduced or eliminated.

I help my son with his taxes. He has three kids and their tax savings on about $250k (dual income) are minimal and definitely much less that the actual expenses of having the kids.
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Old 03-02-2016, 01:47 PM   #19
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How do you make money by spending a dollar and getting 30 cents of it back?
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Old 03-02-2016, 02:05 PM   #20
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How do you make money by spending a dollar and getting 30 cents of it back?
You would make money by getting a larger tax benefit than it costs. Send the mother $1000 to take care of a child, you get another deduction that is worth more, after taxes, than the $1,000 cost you.

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Think about the liability issues of being a legal guardian with deep pockets.
It would be in a different country. Any liability issues would be eliminated either by lack of laws, or distance.

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How would you even give the kid back? Sure, the kid never leaves the biological parents but they'll probably be able to sue you for child support.
Only if the other country allows it, and only if they have standing in the Courts. They are in a different country. You can always give up custody and re-put the kid for adoption if it became an issue.

As far as I know, there is no maximum age you can give up a kid.
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