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.
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 $13,840! Parents whose adjusted gross income is under $203,540 will qualify for the entire $13,840. 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.: