|Posted on November 15, 2015 at 8:00 AM|
While I am very pleased that the adoption tax credit is permanent, I realize that without the credit being refundable, the cost to adopt remains challenging for many. On a very regular basis, I speak with families who have been contacted by an expectant mother who wants the family to love and rear her unborn baby through an adoption plan, but the financial barriers create obstacles to see this dream come to fruition. It breaks my heart to see someone who desires to adopt walk away from a match because s/he simply does not have the finances needed to cover the cost of a private adoption. I believe that the financial aspect of adoption is one of the biggest scares associated with the adoption process, regardless of whether you are contemplating adoption or whether you are already well on your journey toward adoption.
The reality is that adoption can be quite expensive and often takes months (or even years) of planning for an individual or a couple to begin the journey of expanding their forever family through adoption. The price range for adoptions is astounding … adoptions can range from as little as $250 to in excess of $40,000, depending on the type of adoption pursued.
In an effort to asisst families going through this financial struggle while desiring to privately adopt (note: a public agency adoption through the foster care system has a cost of approximately $250 and thus is substantially more affordable than a private adoption), I wanted to post a list of possible resources available to adoptive families, which I hope adoptive families will find useful in their journey toward adoption. I highly recommend researching the various resources to determine what possibilities exist for your family.
•A Federal Tax Credit is available for ALL adoptions (i.e. special needs and non-special needs adoptions), which means that you receive a credit on your tax return for monies spent on Qualified Adoption Expenses. For 2015, the maximum amount of the credit is $13,400 per child. The credit may be reduced based upon your annual gross income, so it is important to speak with tax professional to verify your eligibility if you are relying on this credit. According to the IRS, Qualified Adoption Expenses include “[R]easonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including meals and lodging) and other expenses that are directly related to and for the principal purpose of the legal adoption of an eligible child.” This includes re-adoption expenses to adopt a foreign child. There are some stipulations and expenses that are not included, so again, it is best to speak with a CPA/tax preparer to verify what may and may not be included as Qualified Adoption Expenses. (http://www.irs.gov/taxtopics/tc607.html)
•Show Hope (previously called Shaohannah’s Hope) is “[A] a ministry that enables individuals and communities to change the world for orphans by not only addressing a child’s need for food, shelter, care, and spiritual nourishment, but by also addressing the root issue for an orphan: the lack of a family." Show Hope provides grants to adoptive parents who complete the application process and ultimately are approved. If you are interested in applying for a grant through Show Hope, please click here: http://showhope.org/restore-hope/adoption-aid/.
•Adoption assistance may also be available through an Adoption Fund at your church or in your community. Ask around to see if any of your contacts are aware of a fund to which you can apply. Furthermore, consider being proactive and actually starting an Adoption Fund at your church or in your community to assist other adoptive parents who are interested in adoption but struggling to meet the financial requirements associated with the particular type of adoption in which they are interested. A grant from an Adoption Fund could make all the difference! (http://showhope.org/be-hope/get-involved/#advocate) Other Private Grants do exist for adoptions as well. Asking around or searching online for private grants may be worth your while, so give it a try!
•Adoption Reimbursement Programs, including "Match" grants may be available to adoptive parents through their employer. Check with your HR Department to determine whether some type of reimbursement as related expenses is available, or whether you are entitled to some type of paid leave upon placement of your adopted child into your home. Keep in mind that if you qualify to take leave under the Family Medical Leave Act, this does not mean you will be financially compensated for your leave (only that your position will be held for you and not filled while you are on FMLA leave). It is important to know in advance of your leave what to expect monetarily so that you can adequately plan your leave. The Dave Thomas Foundation offers some amazing resources for you to provide to your employer to increase your employer’s awareness in this area and to aid your employer in implementing employee benefits pertaining to adoption. (http://davethomasfoundation.org/what-we-do/adoption-friendly-workplace/) The Foundation even recognizes organization that are adoption-friendly. You can click here to recommend your organization be listed as an adoption-friendly workplace (http://www.davethomasfoundation.org/what-we-do/adoption-friendly-workplace/). The top adoption-friendly workplaces for 2014 are listed here: https://dciw4f53l7k9i.cloudfront.net/wp-content/uploads/2012/10/DTFA-AFW-BLOOMBERG-ADVERT-FINAL.pdf.
•Some states offer a State Tax Credit in addition to (and separate from) the Federal Adoption Credit. Specifically, as of March 2015, the State of Ohio allows Ohio residents a $10,000 Ohio income tax credit for a family that legally adopts a child. Contact your tax professional to verify what may and may not be included in the State credit.
•Service Members Adoption Reimbursements are often available for active duty personnel adopting from within the U.S. or internationally. In this situation, the U.S. military reimburses up to $2,000 per child and $5,000 per year for related one-time adoption costs. (http://www.dfas.mil/militarymembers/payentitlements/adoptionreimbursement.html) In order to qualify, "the adoption must be arranged by qualified adoption agencies or a source authorized under state or local law. Private and stepchild adoptions must be finalized in a U.S. court." As with the other governmental credits, grants and/or reimbursements, the reimbursement will be made once the adoption is finalized. The qualified expenses vary a bit from the other credits, so be sure to check with your tax professional to verify what exactly is covered under this reimbursement.
•Tax Dependency Exemptions are available for adoptive children and biological children alike, provided the adoptive family provides more than half of the adoptive child(ren)’s support. According to http://www.irs.gov/individuals/article/0,,id=96452,00.html#QA5, “To know whether you qualify to claim the child's exemption or child care credit for the child, see "Exemptions and Credit for Child" and "Dependent Care Expenses" in the Form 1040 Instructions. For further information, see Publication 501 (Exemptions, Standard Deductions and Filing Information) and Publication 503 (Child and Dependent Care Expenses). You may order copies of these publications by calling 1-800-829-3676 (or 1-800-TAX-FORM).”
•Personal Loans are often available to adoptive parents through life insurance policies, banks, and credit unions. It is common for families to obtain a short-term loan, which is then paid off upon receipt of your tax return monies or with employer reimbursement monies once the adoption is finalized. Keep in mind, however, that it could take months, or even well over a year, to receive your tax credit monies (i.e. you could receive placement of your adopted child on July 1, 2015 which means you cannot finalize your adoption in Ohio until at least January 2016. You then would likely include the Qualified Adoption Expenses on your 2016 tax filing, which you may file in March or April of 2017, and receive reimbursement of your federal tax credit 2-6 months after you file your 2016 taxes). I always caution families not to over-extend themselves borrowing money but to ensure that the monthly payment for any adoption loan fits easily into their budget in the event it takes quite a while to receive the anticipated funds to pay off the loan.
If you have any questions or would like any additional information, please do not hesitate to contact Ginn Law Office, LLC!