The costs related to adoption can vary, but in most cases the amount of money necessary to pursue adoption is substantial. The costs related to adoption include agency and legal fees, and birthmother expenses such as medical fees and home study expenses. Thankfully, there are a number of financial assistance options for adoption that may be accessed throughout the process.
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 adoption reimbursement as related expenses. Reimbursement benefits usually range from $2,000 to $10,000 for 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, it is possible that 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 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 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 adoption agency.
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. They are eligible for the dependency exemption even if the adoption has not yet 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.
Private Grants
There may be the availability of a private grant when pursuing adoption. Grant monies may be available for families that are socio-economically challenged or to encourage families to adopt special needs children. Contact the National Adoption Foundation at (203) 791-3811 for more information.
