Resources to Help Defray Adoption Costs
This information was taken directly from Child Welfare Information Gateway
Resources to Help Defray Adoption Costs
In many cases, tax credits, subsidies, employer benefits, and loans or grants can help with adoption costs.
Adoption tax credits may be available to defray some adoption costs. The amount may depend on family income, whether the child is designated as “special needs,” and any other adoption benefits.3 Parents may want to check with a tax professional to determine applicable benefits. With the passage of the Fostering Connections to Success and Increasing Adoption Act of 2008, States are required to inform any individual who is adopting of their eligibility for the adoption tax credit.
Federal Tax Credits, Tax Exclusion, and Refundable Credits. Prospective adoptive parents may qualify for an adoption tax credit (an amount subtracted from their tax liability). They may also be able to exclude from their income some amounts paid to them or for them by their employer under a qualified adoption assistance program. Find information about tax credits and tax exclusion for adoption at the IRS website: http://www.irs.gov/taxtopics/tc607.html
The 2010 passage of the Affordable Care Act (P.L. 111-148) revised the adoption tax credit by:
Extending the credit’s expiration date
Increasing the maximum adoption credit and the amount that can be excluded from income
Making the adoption credit refundable, which can reduce tax liability and potentially result in an IRS refund if the credit exceeds the liability
The IRS offers frequently asked questions and answers about adoption taxes credits, exclusions, and refundable credits for adoption on its website: https://www.irs.gov/businesses/small-businesses-self-employed/tax-benefits-for-adoption
Parents also should find out about the IRS adoption taxpayer identification number (http://www.irs.gov/individuals/article/0,,id=96452,00.html), which is used for temporary identification when adopting taxpayers do not have the child’s Social Security number.
State Tax Credits Several States have enacted tax credits for families adopting children from the public child welfare system. Some States restrict the credit to adoptions from foster care. 4
Subsidies and Reimbursements for Children With Special Needs
Definitions of children with special needs vary for each State, but they often include children who are older, have disabilities, belong to a minority group, or must be placed with siblings. To facilitate the adoption of these children, who often are in foster care, States may provide reimbursements for some adoption costs, as well as subsidies for some children. The Information Gateway factsheet Special Needs Adoption: What Does It Mean? provides more information on this topic: http://www.childwelfare.gov/pubs/factsheets/specialneeds
Reimbursement for Adoption Costs. After families have finalized the adoption of a child with special needs from the public child welfare system, they may be able to apply for reimbursement of expenses they paid related to the adoption, including home study fees, travel expenses to see the child, and attorney fees. Most States, under a Federal match program, offer nonrecurring adoption expenses reimbursements up to a set limit (which cannot exceed $2,000).
Subsidies. Federal and State adoption subsidies (or adoption assistance) may be available to help adoptive parents pay for the ongoing care of children with special physical, mental, or emotional needs. In addition, some children qualify for SSI or Medicaid coverage. The Information Gateway factsheet Adoption Assistance for Children Adopted From Foster Care provides more information on this topic: http://www.childwelfare.gov/pubs/f_subsid.cfm
Many employers provide a range of benefits for families that adopt, such as paid or unpaid leave when a child arrives in the home, reimbursement of some portion of adoption expenses, and assistance with adoption services. (Corporate human resource departments can provide employees with benefit information.) The Information Gateway factsheet Employer- Provided Adoption Benefits provides more information on this topic: http://www.childwelfare.gov/pubs/f_benefi.cfm
Adoption Loans and Grants
Adoptive parents are sometimes eligible for a loan or a grant to offset some of their adoption costs. Such programs have specific requirements for types of adoption and may give preference to families with the greatest financial need or those with other specific factors. Some adoption agencies may also have grant programs. More detailed information may be found by checking the resources listed below.
Continue to Affording Adoption: Additional Resources
Return to Affording Adoption
4 Check your State tax law for the latest information.