Financing Adoption

by Angie Best-Boss

If you have started considering adoption as a way of building your family, you may be surprised at the somewhat hefty price tag adoption can carry. Typical adoption expenses for a domestic public agency adoption run up to $2,500 (in some cases a subsidy is paid after the child is adopted), for a domestic private agency adoption, $4,000-$30,000, for a domestic independent adoption, $8,000-$30,000, and an international private agency or independent adoption can cost between $7,000-$25,000 Itîs enough to make prospective adoptive parents cringe.

Financing an adoption, unless you are well off financially, can be daunting. But it can also be done. You may have to use a combination of resources, from savings to tax credits, an equity loan, or employer benefits, but many families find ways to adopt the child of their dreams.

If youîre thinking seriously of adopting, donît let the expense deter you. On the other hand, donît let your emotions blind you to the real costs. By careful financial planning, you can make adoption an affordable option for your family and provide a nurturing environment for a child.

  • Decide What’s Important
  • Federal Adoption Tax Credit
  • Employer Benefits
  • Adopting through Social Services
  • Adoption Loans
  • Adoption Grants
  • Other Options
  • Bringing Home Baby
  • Other Resources


Decide What’s Important

Infertility treatments are not cheap. If your health insurance does not cover your medications or treatment, for example an IVF attempt, carefully consider how much money you want to spend on infertility treatments before trying to adopt. If having a child related by blood to you is critical, then it may be a wise choice to continue trying IVF for several cycles. If it isnît, it may be more prudent to start looking at different types of adoptions and beginning the homestudy process.

The type of adoption you choose will ultimately decide how expensive the process is going to be. If you are willing to open your hearts to an older child, a sibling group, or a child with special needs, adopting through your local social services agency may be the cost-effective way to adopt. If having a newborn is important, then you will probably need to consider a domestic private agency adoption.

Each type of adoption has its own benefits and challenges, so carefully study as many resources as possible to consider what is right for your family. “We realized what was important for us was to be have children. They different have to be infants, or even the same race as us,” explains Doris Mason of Indianapolis, IN, who adopted two siblings last year. “Our children were six and nine when they came to our home and there was no cost to us. Social services provided the homestudy and they took care of everything else. In fact, because they have some mild developmental delays, they qualified for Medicaid for their health insurance,” said Mason.

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Federal Adoption Tax Credit

Adoptive parents may be able to claim a tax credit on their federal income tax return for qualified adoption expenses. As of 2001, the Adoption Tax Credit increased the adoption tax credit for all adoptions to $10,000, making the credit permanent for all adoptions, and allows the special needs credit to be $10,000. Regardless of out-of-pocket expenses, beginning in 2003, you can make up to $150,000 and still take the deduction.

A child eligible for adoption is an individual who is not yet 18, or who is physically or mentally incapable of caring for himself. An eligible child may not be the child of the taxpayerîs spouse. Qualifying adoption expenses include reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging) while away from home, and other expenses directly related, and whose principal purpose is for, the legal adoption of an eligible child.

In the case of the adoption of a U.S. citizen or resident, the credit can be taken even if the adoption never becomes final; in the case of an adoption of a child not a citizen or resident of the U.S., the credit can only be taken if the adoption becomes final.

To claim the credit, you must file Form 8839 with either Form 1040 or Form 1040A to take the credit. You should maintain records to support any credit claimed. Contact the Internal Revenue Service at or 1-800-829-3676 and request Publication 968 ÎAdoption Tax Credit and Tax Exclusion.î There are other financial benefits as well. For more information, see your tax advisor.

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Employer Benefits

You may be fortunate enough to work at a company that offers incentives to employees who choose to adopt. Or, if you are job-hunting, you may want to strongly consider those with similar policies. For example, the Military Adoption Reimbursement Program enables eligible personnel to receive $2,000 or $5,000 for siblings (complete DD Form 2673). Roughly a quarter of the nationîs employers offer some form of adoption benefits to their employees, according to a 1995 study. Benefits may include: direct reimbursement in the range of $2,000 to $10,000 upon actual placement (usually a flat amount designated for specific adoption expenses), paid leave, in addition to, or including vacation time, sick leave, or personal days, unpaid leave (personal, hardship, medical, or child care), medical expenses of the birth mother, adoption seminars and information classes, as well as counseling and support before and after placement.

Even if your employer doesnît currently offer adoption benefits, ask about their availability. You may be able to persuade your company to begin offering them. Seek out like-minded coworkers, and work with other employees interested in adoption, gather information for the employer, and present your case. (For more information about employer benefits, including materials to help you request that your employer establish a program, call the National Adoption Center at 1-800-TO-ADOPT.)

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Adopting through Social Services

Adopting through social services may be one of the most inexpensive forms of adoption. Typically, these children may be older, be a part of a sibling group and/or be ºspecial needsº adoptions. Many states have tax credits for families adopting children from the public adoption agencies. Contact your state adoption specialist for more information.

April Schmidt of Birmingham, Alabama, was lucky in being able to adopt a child through a Native American tribe. -Actually I donît think that it cost anything except whatever the cost was for his new birth certificate. Our adoption was different though, as it was done through a tribal agency and tribal court where all parties (well, with the exception of my husband and one of the possible birth fathers), are members of the same Native American tribe. There was no need for a lawyer or anything,º said Schmidt. Her situation is unusual, but worth considering if you are of Native American ancestry.

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Adoption Loans

While it is far from ideal to borrow money for an adoption, adoptive families may find a loan necessary to cover the large and immediate expenses. In some cases, you may be able to pay back the loan quickly once you receive a tax credit or are reimbursed by your employer or the military. The National Adoption Foundation (NAF) helps prospective adoptive families with costs of adopting through unsecured loans that give families an additional source of needed funds, without pledging their homes or other forms of collateral. They also offer home equity loans. You can borrow anywhere from $1,500 – $30,000, and there is no collateral required. Use the funds for any adoption-related costs, even travel expenses, to set-up the childîs nursery, pay school tuition, or virtually anything you choose.

A Child Waits Foundation is a non-profit, charitable foundation that makes low cost loans to families adopting internationally. Eligibility to obtain a loan is based on financial need and each case is judged individually. Their goal is to fund families who have exhausted all other resources and who would not be able to continue with an adoption without help. A family may be approved for a loan after the homestudy is complete, but funds are not released until the final two to three weeks before traveling. Information about the foundation and application forms are found at If you do not have web access please call (413) 499-3992, fax (413) 499-2338.

The Waiting Child Loan Fund offers no-interest loans up to $5,000, repayable over three years for families adopting through WACAP. They may be contacted at P.O. Box 88948, Seattle, WA, 98138, phone (206) 575-4550, or email [email protected]. View their website at

Jewish families may apply to the Hebrew Free Loan Association for interest-free loans to Jewish adults who wish to adopt domestically or internationally. Their web site URL is Before you apply for this or any other loan, contact your bank or credit union. Check with your local bank branch to see what they can offer you. Most banks give home equity loans for adoptions or equity line of credit with the interest qualifying for tax deduction, check with your tax account to see if you qualify.

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Adoption Grants

The National Adoption Foundation ( also offers some outright grants to adoptive families who have completed homestudies. The grant program is open to all legal adoptions including public or private agency adoptions, international, special needs, or adoptions facilitated by an attorney. There is no income requirement. There is a simple one-page application and the only requirement to apply is a home study, or one in progress. The Foundationîs board meets four times a year, during the last week of each quarter, to award grants in amounts ranging from $500 to $4,000. For more information, call toll free (866) 219-5657.


Other Options

Many agencies have payment plans or take credit cards. You can make installment payments monthly or quarterly. Check with your agency for creative ways to make payments. For family loans, call your parents, brothers and sisters. They may have a little extra cash lying around to help you. You can pay them back as you are more able later on. Borrow from your 401K or profit-sharing plan, or, if you absolutely have to, your credit card. Credit cards are an easy source of cash, but typically charge high interest rates. Loans on retirement plans offer somewhat lower interest rates; however, if you lose or change jobs and cannot repay the loan within a short time period, the loan becomes a taxable withdrawal. In addition to income taxes you will have to pay on the withdrawal, you will also have to pay a 10 percent penalty if youîre younger than 59.

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Bringing Home Baby

Regardless of whether your adoption fees are minimal or large, once you bring your child home, you must begin to pay for the normal expenses of raising a child. These costs can be something of a shock if youîve never raised children before. According to 1995 figures from the U.S. Department of Agriculture, it costs the average, middle-income family $145,320 to raise a child from birth through the age of 17. And that was seven years ago.

Typical child-raising expenses generally include: food, clothing, furniture, medical expenses, health coverage, braces, and/or glasses, child care, books, games, and toys, activities, clubs, sports, or camps, bicycles or other sporting equipment, music lessons, allowances, car payments, car insurance, and college or vocational school.

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