Meeting the Costs of Adoption

By Cynthia M. Savage

Families hoping to adopt are faced with the steep costs of adoption which varies from agency-to-agency and program-to-program. For the family that does not have a big nest egg, exploring creative ways to finance your adoption while remaining solvent is needed.

One of the first things to understand is that most people contemplating an adoption are not alone in their need to finance their adoption. For families who absolutely cannot find resources, the public adoption agency offers free or low-cost adoptions, but there will be limits on program choices and some special circumstances may apply that are not always appealing to those interested in “straight adoption”, versus fostering with the “intent of adoption.”

It is also important to understand that adoption is not the purchase of a child. There are many service costs involved to process an adoption. Adoption can seem quite costly when you add the legal, program, travel and/or foreign country fees, but with the recently enhanced tax credits, families often recoup over half of their expenses.

On the surface, it is a little difficult to understand why adoption is so expensive, but once a family understands the process better, it becomes clear that the costs are proportional to the services needed and number of other entities involved. Today’s adoption can cost anywhere from nothing to $30,000 and beyond. Using legitimate agencies and reputable sources is one of the most important steps in properly financing your adoption, and most adoption agencies require the family to have all the expected costs covered before the process can even begin.

The National Endowment for Financial Education has compiled a handbook “How to Make Adoption an Affordable Option” which is a great resource that families can review on the Internet.

You can get more information on this on their website at www.nefe.org/adoption.

The Adoption Tax Credit

The Adoption Tax Credit is one of the most beneficial steps the government has taken to encourage adoption of all kinds. Not only does it apply to children adopted in the United States, it also applies to foreign-born and independently adopted children. The Adoption Tax Credit is currently $10,390 per child. If you adopt a sibling group of three, your tax credit will be $31,170.

This credit applies for families who file for income tax. The credit applies to all types of adoption, but there are some conditions. In the case of Fost-Adopt, you do not need to expend fees to get the credit. In the case of independent and international adoptions, you need to expend the same amount of the credit in order to claim it, and most families easily expend the full tax credit amount.

The tax credit applies to finalized adoptions. In the case of many international adoptions, the legal process is completed in the foreign country when you receive the child. Once this has happened, you are eligible to claim your tax credit on the next income tax filing cycle. Families adopting independently or through other domestic Fost-Adopt programs must wait to claim the tax credit until after the child’s adoption has been finalized in court. Some of the more complicated Fost-Adopt cases can take up to two years to complete, so a family will have to wait until the finalization occurs to recieve the credit.

A family may use their adoption tax credit when eligible, but the amount used as a credit on the income tax form cannot exceed their tax liability (what you owe Uncle Sam each year). If you cannot take the entire tax credit the first year you apply for it because your tax liability is less than the credit, you may use the remaining portion the following years until completely utilized. The credit starts to phase out for families making an adjusted gross income of $155,860 and is completely eliminated once an income level (adjusted) of $195,860 is reached.

You can read more about the Adoption Tax Credit on the Internet at www.irs.gov.

Using your Home Equity

With rising home property values and availability of refinancing options, there has never been a better time to use your home equity for a low interest loan. Families often do not realize that they have the ability to access a large amount of cash fairly quickly through this process. If you have been steadily employed and have paid your payments on time, this process should be quite simple. Refinancing can often reduce your monthly payments while giving you a substantial nest egg to finance your adoption.

Family Loans

As soon as a family makes the decision to adopt, we encourage them to share their news with their extended family and friends. The extended family becomes a great resource for loans and outright “gifts” of money. We have witnessed this numerous times and found that potential “to-be” grandparents are often very eager to give early inheritances to help their children become parents.

Bank Loans and Lines of Credit

These loans and lines are to be used cautiously as they may carry a high interest rate. But for short-term usage, they are not a bad idea as long as a pending adoption tax credit or adoption subsidy is forthcoming in the near future.

Using a Public Adoption Agency

One of the only ways of avoiding an adoption fee is by using a public adoption agency. Because these agencies are fully funded through our tax dollars, they can offer free or reduced adoption fees. Families, however, need to understand the restrictions and embrace the children offered with their placement conditions before using reduced fees as the total criteria for selecting a public agency.

Adoption Loan Programs

I have looked at a few of these and have found that the interest rate did not differ from a standard credit card. If a family were looking into one of these programs, I would suggest that caution is used before you sign on the dotted line. Financing $10,000 – $20,000 at 18% interest would be a poor long-term loan decision.

Adoption Grants / Scholarships

There are some organizations that offer assistance to qualifying families. These grants are usually around $1,000 and may have special conditions that apply. Usually the family’s homestudy agency will have to provide proof of a family’s contract with them. If awarded, there are usually other criteria that apply before you receive the funding. You may need to show proof of a referral of a child or you may even need to wait until after the child has been placed with you. This kind of grant is no real financial help when beginning an adoption process.

Adoption Subsidies

This can come in the form of foster care subsidies or adoption assistance payments. These payments assist and encourage a family who is adopting a special-needs foster child. These payments are renewable every two years, but can last until a child’s 18th birthday. In addition, the child will be eligible for a MediCal card that stays with the child until the 18th birthday as well. Families have found the MediCal coverage helpful for children with a lot of needs as they can reserve their own personal insurance programs for secondary payments. The other financial subsidies speak for themselves, but a word of caution - foster care and adoption assistance money should never be considered income to the family. These funds are to be used for the child’s needs.

Employer Adoption Incentives

Some corporations, businesses, employers, and even some branches of the military offer adoption incentive grants, matching grants, and loans which are often substantial ($5,000). Each family is encouraged to explore this with their own employer, as these incentives are often not openly advertised.

For more information, explore the website: Adoption Friendly Workplace.

Making the Commitment

Do not eliminate the possibility of adoption based solely on lack of finances. Many families have found that with a little planning and preparation, the finances become available. If you dream of becoming a parent through adoption, there is a way. Don’t be afraid to explore all the adoption financing options out there, as it costs little to become better informed. If you need someone to confidentially discuss your own personal financial situation, we have an adoptive parent volunteer who is a Certified Public Accountant who is more than happy to help you explore your options.

We also invite you to attend one of our monthly “Meet-the-Agency” nights where programs and financing including adoption subsidies are discussed. You are also encouraged to schedule a free private consultation with one of our qualified staff who can be helpful to you in exploring the possibility of adoption further.

We wish you much success in pursuing your dream to become a parent. With a little imagination, determination and preparation, we know you can do it!

Sincerely,
Cynthia M. Savage, Executive Director
Adoption Horizons