The costs associated with adoption can vary state by state and agency by agency. No matter which agency you use, many people find the amount of money necessary to pursue adoption as substantial.
The costs related to adoption include agency and legal fees, potential birthmother expenses such as medical fees, and home study expenses. Thankfully, there are various options for getting financial assistance and lessening the effect on your family’s financial responsibilities.
However, even with these financial support services, adoption can still be an investment that detours or even prevents many wonderful families from pursuing this path to try and grow their families.
Financial Assistance for Adoption: Credits and Benefits
The following is a list of potential financial resources with a brief description:
Employee Benefits
It is common for employers to provide some type of health benefits. However, it is less frequent for those benefits to cover fertility treatments and even more infrequent to cover adoption-related expenses.
However, your employer may provide some types of benefits, so an inquiry with human resources is a great place to start. These benefits are usually provided as a stipend or set amount to go towards your adoption costs. These funds might be provided as a reimbursement lump sum once your adoption is completed.
It is important to check with your employer and ask questions to make sure you understand the process for securing any adoption-related benefits. Reimbursement benefits typically range from $2,000 to $10,000 which will go toward your direct adoption expenses. Company policies may vary regarding approved adoption expenses.
If you are not sure if your company offers adoption benefits, it is wise to check with your Human Resources Department. If you find that your company does not offer that specific benefit, your inquiry may lead them to consider the possibility of adding it.
Federal Tax Credit
The federal tax credit for adoption (S.148 & H.R. 622) was included in the Tax Reconciliation Bill (H.R. 1836) and passed on May 26, 2001.
It was signed into law by President Bush and includes the following benefits:
- The tax credit was made permanent
- The amount of credit increased from $5,000 to $10,000
- Income limitations were adjusted allowing incomes under $164,410 to receive full credit and adjusted credits were made available to those with incomes between $164,410 and $204,410.
- No credit is available to those with incomes over $204,410.
- The maximum amount of credit will be adjusted to match the inflation
- The law eliminated the need for families who adopt special needs children to show expenses
For additional information contact the Internal Revenue Service at or call 1-800-829-3676 and request information on the Adoption Tax Credit and Tax Exclusion from publication 968.
State Tax Credit
Contact your state adoption specialist to find out if your state provides a tax credit if a child is adopted from a public or private adoption agency. Some states have specific amounts and other states match the IRS.
These credits will be applied to your state and IRS tax forms for the year in which you completed the adoption.
Military Benefits
In most cases, the U.S. military will reimburse up to $2,000 per child for related one-time adoption costs. This reimbursement is for active-duty personnel and the reimbursement is available whether the couple is adopting from within the U.S. or internationally.
The adoption must take place through a state adoption agency or a private non-profit agency. The $2,000 reimbursement will be made once the adoption is finalized.
Dependency Exemption
Although this is not an adoption-specific benefit, adoptive parents qualify for taking the same dependency exemption on their income taxes as other parents. You can count the baby/child as a dependent at the point you begin to care for the child. The dependency exemption may be leveraged even if the adoption has not been finalized.
Adoption Loans
Adoptive parents can pursue loans for adoption expenses through some life insurance policies, banks, and credit unions. Some couples, who use loans for their adoption, pay them off with tax credit monies or with employer reimbursement monies after the adoption is finalized.
Adoption Grants
Many organizations provide adoption grants to help support families financially. The journey through adoption can be expensive and these grants are what make pursuing adoption plausible for some families.
Some organizations provide grant monies to help encourage the adoption of children with special needs or challenges. ABBA Fund, A Child Waiting Foundation, Show Hope, Lifesong for Orphans, Both Hands, and A Chosen Life Adoption are just some of the many organizations that offer adoption grants.
You can search “Adoption Grants” online or Contact the National Adoption Foundation at (203) 791-3811 for more information and access to more organizations offering financial support to families.
