It can be expensive to adopt a child. Fortunately, there are lots of tools at your disposal. The price of adoption and the several types of financial aid that may be available to you are shown here.
What Is the Cost of Adoption?
In the US, adoption expenses range greatly. According to 2016 estimates, the cost of adopting a child who is currently in state-sponsored foster care can be quite low, compared to the $20,000 to $45,000 cost of adopting through a private agency.
It might cost between $20,000 and $50,000 to adopt a child from abroad.
Based on 2015 U.S. Department of Agriculture data and a 2.2 per cent annual inflation rate, Investopedia projected the average cost of raising a child from birth to age 18 on a per capita basis.
What Funding Options Are There to Help Pay for Adoption?
Governmental and private sources of funding are both available to assist with adoption expenses. These are the principal ones:
Foster Children’s Adoption Assistance from the Federal and State Governments
For children adopted from foster care, the federal and state governments provide adoption subsidies. The youngster must satisfy a set of requirements—which may differ from state to state—to be eligible.
The U.S. Department of Health and Human Services’ Children’s Bureau states that “the phrase ‘eligible’ most usually refers to children who are school-aged, members of a sibling group, children of colour, or those with certain physical, emotional, or developmental requirements” (HHS).
Medical aid, social services, monthly monetary contributions, and one-time adoption costs are all examples of assistance.
Within the HHS’s Child Welfare Information Gateway, more details on these benefits and how to apply for them are available.
Adoption-Related Federal Tax Credits
Adoptive parents are eligible for a federal tax credit. According to the Internal Revenue Service, eligibility requirements include being “under the age of 18 or…physically or mentally incapable of self-care” (IRS). It is not acceptable to adopt the taxpayer’s spouse’s child.
Income restrictions apply to the adoption tax credit. It starts to phase out in 2022 if the taxpayer’s modified adjusted gross income (MAGI) is $223,410 or more, and it completely phases out at $263,410. The top tax credit amount for 2022 is $14,890.6.
In addition, subject to income restrictions, adoptive parents have the same parental rights as normal parents regarding the $2,000 annual child tax credit.
(The credit was temporarily increased to a maximum of $3,600 per year for 2021; but, for 2022, it will revert to its prior maximum of $2,000 unless Congress reinstates a greater amount.
Additionally, several states provide adoption-related tax credits for state income taxes.
Because it lowers your tax liability dollar for dollar, a tax credit is preferable to a tax deduction.
Simply put, a tax deduction lowers the amount of income that must be taxed.
Financial Aid for Adoption
In addition to financial assistance from the government, adopting parents can also apply for grants and loans from private foundations and other institutions.
Some of these are included by HHS as a part of its Child Welfare Information Gateway. Ten Rewards for Employer-Sponsored Adoption.
Another potential helper is your employer. Companies are beginning to offer adoption support services. These programs may offer other benefits, such as parental leave, in addition to cash aid.
A lump-sum payment or reimbursement for expenses up to a predetermined limit may be offered by the employer as financial help.
These benefits can be worth anywhere from $500 and $35,000, with $9,000 being the typical limit, according to the Dave Thomas Foundation for Adoption.
Additionally, up to the same amount as the federal tax credit ($14,890 for 2022) the employer-provided adoption assistance is exempt from the employee’s taxable income.
A similar income range (from $223,410 to $263,410 for 2022) is used to phase out the exclusion as well.
For instance, if an employee satisfies the income standards and has $30,000 in adoption costs, they may be eligible for a tax credit of $14,890 as well as an additional $14,890 in employer aid that can be deducted from their taxes.
Accessed Retirement Accounts
You may also be able to get money from your employer’s 401(k) plan or your own individual retirement account (IRA) if you have either of those.
If you’re under the age of 59 and 12, any withdrawals you make will typically be subject to a 10% early withdrawal penalty in addition to any income tax you owe.
Adoption is one of the exclusions to the penalty, nevertheless, with the SECURE Act’s approval in 2019.
According to current tax law, individuals may withdraw up to $5,000 penalty-free for adoption-related expenses “during the 1 year beginning on the date the individual’s kid is born or the date the individual’s legal adoption of an eligible adoptee is finalized.”
Additionally, the legislation states that the adoptee must be an “eligible adoptee,” which is defined by the IRS as “any individual (other than a child of the taxpayer’s spouse) who has not attained the age of 18 or is physically or mentally incapable of supporting himself.”
A married couple could receive a total of $10,000 in dividends under these regulations.
Home equity loans and lines of credit totalling 17 (HELOCs)-
You can obtain a home equity loan or home equity line of credit (HELOC) for any objective you want, including adoption, provided you have a sufficient amount of equity in your property and satisfy the lender’s other financial standards.
Another choice might be a personal loan from a bank or other lender, although their interest rates are frequently much higher.
What Is the Price to Adopt a Foster Child?
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The price range is from $0 and $2,500, according to the North American Council on Adoptable Children.
Our Paid Parental Leave Rights Granted to Adoptive Parents?
not on a federal level. Adoptive parents, however, may be qualified for 12 weeks of unpaid parental or family leave within the first year of placement under the federal Family and Medical Leave Act of 1993.
They must have been employed by that employer for at least a year and at least 50 employees are required for them to be eligible.
Although the United States does not have a federal policy establishing paid leave for adoptive or other parents, such leave is already offered in 11 states and the District of Columbia or is about to be implemented.
Seven of them give employees paid leave for a minimum of six weeks. 22 Some employers even have their own paid voluntary leave policies.
