Cost of Adoption
One of the first things families learn about adoption is that the fees associated with the cost of adoption can be substantial. If you’re hoping to adopt a baby, the costs you can expect include, but are not limited to, the following:
- Adoption Program Fee — Fee is determined by the adoption professional you choose to work with.
- Home Study Fee — Fee is determined by the state you live in.
- Legal Fees — Fees include hiring a social worker or attorney in the birthmother’s state. The amount is determined by the state in which the birthmother lives.
- Court Fees — Fees include those associated with legally finalizing the adoption in court.
- Travel Expenses — Usually some amount of travel is required to pick up your baby after he or she is born. Travel may also be required if you and the birthmother meet before the birth. Expenses include airfare, ground transportation, lodging, and meals.
- Birthmother Expenses — As permitted by state law, you may be required to pay for some of the birthmother’s expenses, including medical fees, counseling, and lodging.
With all these expenses, it's easy to feel overwhelmed and think it an impossible task to find the money required. Often, families can afford to raise a child, but affording adoption itself can be daunting.
Fortunately, there are many resources available to assist you. We want to help make your dream of adoption come true, so we’ve provided information about these resources below. Some are relatively easy to obtain if you qualify, such as the Adoption Tax Credit and employer adoption benefits. Others will take time and effort on your part. The good news is that you can afford the cost of adoption if you are willing to work at it. Set short- and long-term goals and take it one step at a time.
Adoption Tax Credit
The Basics of the Adoption Tax Credit
By: Michelle M. Hughes
How much is the Adoption Tax Credit, and who qualifies?
The Adoption Tax Credit is now $13,570! Parents whose adjusted gross income is under $203,540 will qualify for the entire $13,570. Parents whose incomes are between $203,540 and $243,540 will qualify for a partial credit. If you earn over $243,540, you would not qualify for the credit. While most adoptive parents will still find they have to pay substantial sums of money prior to the adoption, once completed, the credit should relieve some of the financial burden for most parents!
What should I do to document that I qualify for this tax credit?
It is important that adoptive parents get and keep receipts for all legitimate adoption expenses. If it is a domestic, non-special needs adoption, the credit is taken in the year the expenses are incurred. Legitimate adoption expenses would include, but are not limited to, LifeLong Adoption's fee, attorney fees, agency fees, consultation fees, and legitimate birth parent expenses.
What is the difference between a credit and a deduction?
A credit is an amount that can be deducted directly from the taxes that you owe. It means you can get reimbursed dollar for dollar, unlike a deduction, provided you qualify for the credit.
What if the adoption never finalizes?
Adoptive parents can take the credit even if the adoption does not finalize in a domestic adoption.
Is the Adoption Tax Credit the same as the child tax credit?
No. This Adoption Tax Credit is separate and in addition to the child tax credit.
Qualifying adoption expenses are reasonable and necessary adoption costs, attorney and court fees, traveling expenses (including amounts spent for meals and lodging) while away from home, and other expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child.
Qualifying adoption expenses do not include expenses:
- that violate state or federal law;
- for carrying out any surrogate parenting arrangement;
- for the adoption of your spouse's child;
- paid using funds received from any federal, state, or local program;
- allowed as a credit or deduction under any other federal income tax rule; or
- paid or reimbursed by your employer or otherwise (except that amounts paid or reimbursed under an adoption assistance program may be qualifying expenses for the exclusion).
** Please contact your tax specialist to see if you qualify for the Adoption Tax Credit. Click here for more specifics about the Adoption Tax Credit from the IRS.: http://www.irs.gov/taxtopics/tc607.html
Adoption Loans & Grants
You might be eligible for a loan through one of these providers!ABBA Fund
Loans from $6,000 to $8,000
- For Christian families
- Interest-free loans and grants
$500 adoption grants and adoption loans up to $50,000
- For Christian families
- Low interest rates
- Terms up to 7 years
Personal loans from $1,000 to $35,000
- No prepayment fees
- 2- to 5-year terms
- Fast approvals
Loans up to $15,000
- For Jewish families
- Interest-free loans
Matching grants from $1,000 to $4,000 and loans from $4,000 to $8,000
- For Christian families
- The couple’s church family is encouraged to financially support the adoption, and a grant is matched to the amount raised
- Interest-free loans are paid through manageable monthly or annual payments
Loans available from $5,000 to $100,000
- Competitive Interest Rates
- Flexible Terms
- No Fees or prepayment penalties
Grants from $500 to $2,000 and loans from $5,000 to $50,000
- Grants are awarded regardless of race, ethnicity, gender, age, sexual orientation, family characteristics, or income
- Must have a completed home study or be undergoing the home study process
- Partnered with Citizens One to provide low-interest adoption loans
Loans up to $5,000
- Loan is not funded until after the adoption has been granted by authorities
Interest-free loans up to $7,500
- Monthly payments are required, but the amount is set by the family
- Must have an approved home study
- Must be within three to six months of completing your adoption
Personal loans from $500 to $35,000
- Get matched with a lender
- Competitive interest rates
- Peer-to-peer loans, personal installment loans, and bank personal loans available
- Terms up to 6 years
Loans available up to $35,000
- Competitive Interest Rates
- 3- or 5-years terms
- No hidden fees or prepayment penalties
- Not available to borrowers in Iowa, Maine, West Virginia, and North Dakota
Personal loans from $5,000 to $100,000
- Fixed annual rates
- 3-, 5-, or 7-year terms
- No hidden fees
- $100 welcome bonus
Personal loans from $1,000 to $50,000
- Low interest rates
- 3- and 5-year terms
- No prepayment penalties
Visit Fund Your Adoption for a comprehensive list of adoption grants.
Other Adoption Financing Options
Loans are one way to pay for some or all adoption costs. You can talk to your bank about home equity or line of credit loans. While loans do require repayment, there are resources that can help you with that once your adoption is finalized, such as the Adoption Tax Credit.
Home Mortgage Refinance
One of many ways to generate income to afford the cost of adoption is mortgage refinancing. The decision to refinance has just as much to do with your circumstances as it does with the current interest rate available. For example, if you have an adjustable-rate mortgage (ARM), or your fixed-rate mortgage (FRM) is about to turn into an ARM, and the interest rate is going up, you might want to consider refinancing or renegotiating your mortgage rate. Other factors, such as the amount of equity you have gained and whether or not you pay mortgage insurance, help determine whether you are a good candidate for refinancing.
Refinancing can help by reducing your monthly mortgage payment, and the surplus could then go into savings toward your adoption costs. It can also help if you are able to use your home equity and higher appraisal of your home’s value to refinance for an amount higher than your current mortgage, using the excess amount to help with your adoption costs.
Home Equity Line of Credit
Though perhaps not the first approach to generating funds for an adoption, seeking a Home Equity Line of Credit (HELOC) has become the most common way to pay adoption costs. This involves using a credit line to borrow against the equity in your home.
Some may balk at the thought of going into debt for adoption costs, but just as many won’t think twice about taking out a loan to buy a car, buy a house, go on vacation, etc. What better investment than a child?
When choosing this method to generate the funds needed, keep in mind that you must pay this money back. You can use your full tax refund(s) from using the Adoption Tax Credit.
Be careful to take out only what you can afford to repay monthly should you be unable to raise extra funds. Compare interest rates with lenders and banks for the lowest rates, and be sure to talk with a tax professional regarding the tax implications of this type of loan.
Funding Your Adoption With a Credit Card
Using a credit card to help pay for adoption costs, or "borrowing" on your credit card, should be one of the last tools you take of the toolbox. Even so, it is an option that many have used to help pay for the cost of adoption.
Sometimes the deadline for payment of adoption-related fees arrives before a family can raise the funds. A credit card is a way to pay the immediate fees while generating the extra income needed. As you generate the income, immediately pay the credit card balance. Don't be tempted to pay off the balance later.
Just as with other types of loans, use only what you'll be able to repay; just because it is available doesn't mean you should use it. Shop around for the lowest possible interest rate with no annual fee. If you can pay off the entire balance within the introductory period of a zero interest credit card, you can use this option free of interest.
Military Adoption Benefits
If you are currently serving on continuous active duty in the military, you are eligible for military adoption benefits. Active duty families may receive up to $2,000 reimbursement for adoption-related expenses of a single child and up to $5,000 per year if more than one child is adopted. The adoption must be arranged through a source that is authorized by a state to provide adoption placements, if the adoption is supervised by a court under state or local law. Paid after the adoption is finalized, this benefit is not doubled if both parents are in the military. Expenses that can be reimbursed include agency fees, legal fees, placement fees, and medical expenses. Travel expenses are not eligible for reimbursement.
Military parents can exercise an option to have children that are placed with them covered by their military medical program even before the adoption is finalized. You should apply to the Secretary of your branch of the service for the child to be a "Secretary Designee."
Under the military’s Program for Persons with Disabilities, military parents may be eligible to receive up to $1,000 a month for disabled or special needs adopted children. The military also has a program called the Exceptional Family Member Program that will ensure adoptive parents of special needs children are assigned to bases or duty stations that can meet the needs of the child.
Service members are also permitted to take up to 21 days of non-chargeable leave in addition to their regular leave in conjunction with an adoption.
For more information about Military Adoption Benefits or if you have questions, contact the National Military Family Association.
Employer Adoption Benefits
Many employers provide their employees with adoption benefits. These benefits could include, but are not limited to, any of the following:
- Informational Resources — This benefit could include referrals to adoption organizations and/or access to an adoption specialist.
- Financial Assistance — This benefit could include a lump sum payment, payment for certain adoption-related fees, and/or partial reimbursement.
- Parental Leave — In many states, employers are required by law to offer some length of paid or unpaid parental leave to adoptive parents.
Check with your company’s human resources or personnel department to find out if your employer offers adoption benefits.