How to pay for adoption

Adopting a child can be expensive. Fortunately, there are many resources that can help you. Here is an overview of adoption costs and the different forms of financial assistance that may be available to you.

Key points to remember

  • Adopting a child can cost between $0 and $50,000 or more, depending on the type of adoption.
  • The US government and states have programs that can help cover costs.
  • Grants and loans are also available from some foundations and private organizations.
  • Borrowing from a retirement plan or taking out a home equity loan can be other sources of funds.

What does adoption cost?

Adoption costs in the United States vary widely. Adopting a child who is currently in government-sponsored foster care can cost very little, while adopting through a private agency can cost between $20,000 and $45,000, depending on 2016 estimates. Adopting a child from another country can cost from $20,000
at $50,000.


The estimated average cost to raise a child born in 2022 to age 18, as calculated by Investopedia from 2015 US Department of Agriculture data using an annual inflation rate of 2, 2%

What resources are available to help pay for adoption?

Money to help cover the cost of adoption is available from government and private sector sources. These are the main ones:

Federal and State Adoption Assistance for Foster Children

Both the federal and state governments offer adoption grants for children adopted into foster care. To be eligible, the child must meet certain criteria, which may vary from state to state. “The term ‘eligible’ most often refers to school-aged children; is part of a sibling; colored children; or those with specific physical, emotional, or developmental needs,” according to the Children’s Bureau, which is part of the US Department of Health and Human Services (HHS). Assistance may include “monthly cash payments, medical assistance, social services, and one-time adoption expenses.” More information about these benefits and how to apply for them is available through the HHS Child Welfare Information Gateway.

Federal Adoption Tax Credits

The federal government grants a tax credit to adoptive parents. To be eligible, the adoptee must be “under the age of 18 or … physically or mentally incapable of caring for themselves,” according to the Internal Revenue Service (IRS). The adoption of the child of the taxpayer’s spouse is not eligible.

Eligible expenses include:

  • Reasonable and Necessary Adoption Expenses
  • Court costs and attorney fees
  • Trip costs
  • Other directly related expenses

The adoption tax credit is subject to income limits. In 2022, it begins to disappear if the taxpayer’s modified adjusted gross income (MAGI) is $223,410 or more, and it disappears entirely at $263,410. The maximum tax credit for 2022 is $14,890.

In addition, adoptive parents, like all other parents, are eligible for the child tax credit of up to $2,000 per year, subject to income limits. (For 2021, the appropriation was temporarily increased to $3,600 per year, but it will revert to its previous maximum of $2,000 for 2022 unless Congress reinstates a higher amount.)

Some states also offer adoption-related tax credits on their income taxes.

A tax credit is better than a tax deduction because it reduces the taxes you have to pay dollar for dollar. A tax deduction simply reduces the amount of income on which you pay tax.

Grants and Loans for Adoption

In addition to government assistance, there are private foundations and other organizations that provide grants and loans to adoptive parents. HHS lists some of these as part of its Child Protection Information Gateway.

Employer sponsored adoption benefits

Your employer could be another source of help. A growing percentage of companies have adoption assistance programs. These programs may not only provide financial assistance, but also other benefits, such as parental leave.

Financial assistance from the employer can take the form of a lump sum payment or reimbursement of expenses up to a certain maximum. According to the Dave Thomas Foundation for Adoption, these benefits can range from $500 to $35,000, with $9,000 being the average maximum.

As a bonus, employer-provided adoption assistance is excluded from the employee’s taxable income up to the same limit as the federal tax credit ($14,890 for 2022). The exclusion is also phased out over the same income bracket (from $223,410 to $263,410 for 2022).

For example, if an employee has $30,000 in adoption expenses and meets the income requirements, they could qualify for a tax credit of $14,890 and also exclude up to an additional $14,890 of assistance from the employer of his taxes.

Leverage your retirement accounts

If you participate in a 401(k) plan at work or own an Individual Retirement Account (IRA) on your own, they could also be a source of funds. Normally, if you are under 59.5, any withdrawals you make will be subject to a 10% early withdrawal penalty in addition to the income tax you owe. Since the adoption of the SECURE law in 2019, adoption is however one of the exceptions to the sentence.

Under current tax law, individuals are eligible for a penalty-free distribution of up to $5,000 to pay for adoption expenses “during the one-year period beginning on the date of birth of the child. individual’s child or at which the legal adoption by the person of an eligible adoptee is finalized.

The law also specifies that the adoptee must be an “eligible adoptee,” which the IRS defines as “any person (other than a child of the taxpayer’s spouse) who has not reached the age of 18 or is physically or mentally incapable of supporting himself”. ”

Under these rules, a married couple could receive distributions totaling $10,000.

Home equity loans and home equity lines of credit (HELOC)

As long as you have sufficient net worth and meet the lender‘s other financial requirements, you can apply for a home equity loan or home equity line of credit (HELOC) for any purpose you want, including adoption. A personal loan from a bank or other lender might be another option, but they tend to have much higher interest rates.

How much does adopting a foster child cost?

The North American Council on Adoptable Children estimates the cost between $0 and $2,500.

Are adoptive parents entitled to paid parental leave?

Not at the national level. However, under the federal Family and Medical Leave Act of 1993, adoptive parents may be entitled to 12 weeks of unpaid parental or family leave during the first year of placement. To qualify, they must have worked for that employer for at least 12 months and the employer must have at least 50 employees.

Although the United States does not have a national policy providing paid leave for adoptive or other parents, such leave is available or expected to come into effect in 11 states plus the District of Columbia. Of these, seven offer a minimum of six weeks of paid vacation. Some employers also have their own voluntary paid vacation programs.

Can you enroll an adopted child in your employer’s health insurance plan?

Yes. According to the United States Department of Labor Employee Benefits Security Administration, “As long as you register your child within 30 days of adoption or placement for adoption, coverage should be effective from the date of adoption or placement of your child and your child cannot be subject to a pre-existing condition exclusion.

If you have health coverage through the Affordable Care Act Health Insurance Marketplace, adoption entitles you to a special enrollment period during which you can add the child to your policy. .

The essential

There are many ways to pay for adoption, from government programs to private programs to employers. You can also borrow money if needed, including from your retirement plans. And once you become a parent, you will also be eligible for tax benefits for child care.

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