Financial Assistance & Resources

Financial Assistance

There are many types of financial assistance available to those wishing to adopt. The following information details many of the available programs.

Federal Tax Credit Information

The Hope for Children Act, a federal program, which took effect on January 1, 2002, provides a $10,000 tax credit for all adoptions and increases the employer adoption assistance exclusion to $10,000. This tax credit assists families who would like to open their home to a child, but are prevented or delayed in doing so by the high cost of adoption. Families can spend anywhere from $8,000 to $30,000 to adopt a child and this legislation eases this financial burden to ensure that children quickly find a permanent, loving home.

Will a family be able to claim the full credit by spreading it over multiple years?

Yes, the credit can be applied against tax liability over five years or, beginning in 2002, whenever the family reaches the $10,000 cap, whichever occurs first.

What are considered "qualifying adoption expenses"?

The Internal Revenue Service outlines “qualifying adoption expenses” as "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 to, and whose principal purpose is for, the legal adoption of an eligible child."

Will a $10,000 tax credit be enough?

The Hope for Children Act is a healthy start to ensuring more children find a loving home. While some adoptions will cost well over $10,000, raising the limit will aid more families in their efforts to adopt a child in need. The Hope for Children Act is indexed for inflation to ensure that the tax credit and income limitations continue to rise alongside the cost of living. Additionally, the full credit can be claimed for adjusted gross income (AGI) up to $150,000, and is gradually phased out for incomes between $150,000 - $190,000. The tax credit is exempted from the Alternative Minimum Tax.

How does the Hope for Children Act affect special needs adoptions?

The $6,000 adoption tax credit for special needs children is permanent law. However, the tax credit can only be utilized for qualified adoption expenses. While most special needs adoptions are from public agencies and do not have these up-front, 'qualified' costs, the adopting families face other challenges in opening up their home to special needs children. Thus, the Hope for Children Act provides a flat $10,000 credit for special needs adoptions to help families with one-time and ongoing costs such as mental health counseling, physical therapy and medical costs, transportation costs, and home modifications to accommodate wheelchair ramps or large sibling groups. States have their own definitions of special needs children and use determining factors such as the child's age, ethnic background, siblings, and mental, physical or emotional handicap.

How does the employer adoption assistance exclusion work?

Up to $10,000 in adoption assistance provided by an employer may be excluded from an employee's taxable income. This exclusion parallels the tax credit in all forms.

Who should I contact for clarification on my particular tax credit scenario?

Contact the Internal Revenue Service at 800.829.1040 with your specific questions, or consult a tax professional.

PLEASE NOTE: This information is provided as a general guideline on the new provisions of the adoption tax credit. It should not be used as a definitive source of information for individual case scenarios.

Employee Benefits Programs

Many companies offer some type of adoption benefits to their employees. These benefits, depending on your company, may include:

Direct reimbursement in the range of $2,000 to $10,000 upon placement

Unpaid leave

Even if your employer does not currently offer adoption benefits, ask about their availability. You may be able to convince your company to begin offering them. Your employer may also have an Employee Assistance Program (EAP). This benefit helps employees deal with unusual personal situations or problems.

Loans

While it's far from ideal to borrow money, adoptive families may find a loan necessary. In some cases you may need a loan just until you receive your tax credit or are reimbursed by your employer. Possible loan sources include:

Private Grant and Special Loan Programs: Adoption loans, both home equity and unsecured, may be obtained through the National Adoption Foundation (100 Mill Plain Road, Danbury, CT 06811; 201.791.3811) They also award grants to needy adoptive parents.

Bank Loans: Some banks offer low-interest loans or credit lines for adoptive parents.

Birth Parent Adoption Rights

1. You have the right to plan and participate in all phases of the adoption process.
2. You have the right to select the family you would like to parent your child.
3. You have the right to meet and interview a prospective adoptive family. You also have the right to decide against adoption with that particular family and pursue adoption with another family.
4. You have the right to an open and honest relationship with the adopting family.
5. You have the right to request ongoing information and contact with the adopting family through direct visits, letters, picture exchanges or phone calls.
6. You have the right to request a confidential adoption in which there is no ongoing contact and only non-identifying information is shared.
7. You have the right to receive ongoing counseling and support throughout the adoption process and following the birth of the baby.
8. You have the right to request financial assistance with adoption- and pregnancy-related expenses.
9. You have the right to see, hold and spend time with the baby at birth.
10. You have the right to have additional time to make your decision beyond the 72 hours required by Arizona law.
11. You have the right to request transitional care for your child in order to solidify your decision, without interference from the adoptive parents.
12. You have the right to change your mind about adoption at any time prior to signing adoption consents.
13. You have the right to be treated with dignity and respect.