Adopting a child can be expensive but a federal tax credit and state anꦚd federal adoption assistance programs can help. You may have other options as well.

Here's a look at the costs of adoption and the various forms of financial assistance that may be available to you.

What Does Adoption Cost? 

澳洲幸运5官方开奖结果体彩网: Adoption costs in the U.S. va❀ry widely.

Adopting a child who is in government-sponsored foster care may cost a few thousand dollars. The cost of adopting through a private agency can reach up to $60,000. Independent agencies outside the public child welfare system typically cost from $25,000 to $45,000. Adopting a child from another country can run between $20,000 and $50,000 on average.

What Resourc🤡es Are Availab💫le to Help Pay for Adoption?

Money to help defray the cost of adoption is ava𝔍ilable from both governmental and private-sector so🤡urces.

Federal and State Adoption Assistﷺan🌞ce for Children in Foster Care

The federal government and state governments offer adoption 澳洲幸运5官方开奖结果体彩网:subsidies for children adopted from foster care. The child mu♕st meet certain criteria to be eligible and the provisions can vary from state to state.

“The term ‘eligible’ most frequently refers to children who are school-aged, part of a sibling group, children of color, or those with specific physical, emotional, or developmental needs,” according to the Children’s Bureau which is part of the U.S. Departme🔥nt of Health and Human Services (HHS). Assistance can include “monthly cash payments, medical assistance, social services, and nonrecurring adoption expenses.”

More informati💙on on these benefits and how to apply for them is available as part of HHS’s .🌳

Federal Tax Credits for Adoption

The federal government provides a tax credit to adoptive parents. An eligible adoptee must be “under the age of 18 or […] physically or mentally incapable of self-care,” according to the 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS). Adopting the child of the taxpayer’s spouse doesn't qualify.

 Eligible expenses include:

• Reasonable and necessary adoption fees
• Court costs and attorney fees
• Travel expenses
• Other directly related expenses

The adoption tax credit is subject to income limits. It begins to phase out if the taxpayer’s 澳洲幸运5官方🎀开奖结果体彩网:modified﷽ adjusted gross income (MAGI) is $252,150 or higher in 2024. It phases out entirely at $292,150. The adoption tax credit began to phase out if the taxpayer’s MAGI was $239,230 in 2023 and it phased out entirely at $279,230. The maximum tax credit for 2024 is $16,810. It was $15,950 for 2023.

Some states also offer adoption-related tax credits.

Grants and Loans for Adoption

Private foundations and other organizations offer grants a꧟nd loans to adoptive parents in addition to🗹 governmental aid. HHS lists some of them as part of its . 

Employer-Sponsored Adoption Benefits 

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

Employer financial assistance may take the form of a lump-sum payment or reimbursement for expenses up to a certain maximum. Those benefits can range anywhere from $500 to $35,000, with $9,000 being the average maximum, according to the Dave Thomas Foundation for Adoption.  

As a bonus, employer-provided adoption assistance is excludable from the employee’s taxable income up to the same limit as the federal tax credit: $15,950 in 2023 and $16,810 in 2024. The exclusion also phases out over the same income range from $239,230 to $279,230 in 2023 and $252,150 to $292,150 in 2024.

An employee could claim an adoption tax credit for $16,810 in 2024 and also exclude another $16,810 in employer assistance from their taxable income in 2024 but only if their total adoption expenses were enough to cover both tax breaks: $16,810 + $16,810 = $33,620. They would have to have at least $33,620 in total adoption expenses to claim both.

They would be able to exclude only $16,810 from their income if their employer gave them $17,000 because excluding the entire $17,000 would put their total tax break at $34,000, more than the combined respective limits.

Tapping Your Retirement Accounts

Your retirement accounts could also be a source of funds if you participate in a 401(k) plan at work or have an 澳洲幸运5官方开奖结果体彩网:individual retirement 🍰account (IRA) on your own. Any withdrawals you make before you reach age 59½ would normally be subject to a 10% 澳洲幸运5官方开奖结果体彩网:early withdrawal penalty on top of the income tax you owe. Adoption is an exception to penalty, however, since the passage of the 澳洲幸运5官方开奖结果体彩网:SECURE Act in 2019 in 2019.

Individuals can take a penalty-free distribution of up to $5,000 to pay for adoption expenses “during the 1-year period beginning on the date on which the child of the individual is born or on which the legal adoption by the individual of an eligible adoptee is finalized.”

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

A married couple could take distributions totaling $10,00ཧ0 under these rules.

Home Equity Loans and Lines of Credit (HELOCs)

You can take out a home equity loan or home equity line 𓆏of credit (HELOC) for any purpose you wish, including adoption, as long as you have sufficient 澳洲幸运5官方开奖结果体彩网:home equity and meet the lender’s other financial requirements. A 澳洲幸运5官方开奖结果体彩网:personal loan from a bank or other lender could be another option but they tend to have significantly higher interest rates.

The Bottom Line

You can pay for adoption in many ways from taking advantage of government programs to private and employer-based ones. You can also borrow money if necessary, including from your retirement plans. You'll qualify for child tax benefits as well when you're a parent.