Financial Assistance for Adoption
A tax credit of up to $10,160 is available to adoptive parents whose annual income falls below $192,000. This $10,160 tax credit is available for all adoptions finalized after 2002. Below is a summary of the Adoption Tax Credit. Also see IRS publication 968, Tax Benefits for Adoption, available from the IRS, here:
Adoption benefits are now offered by many employers. Check to see what's offered by yours. To see a list of employers currently offering benefits, see what the following site has listed:
The National Adoption Foundation offers unsecured and home equity, credit lines and grants for adoptive parents. They can be reached at
100 Mill Plain Road
Danbury, CT 06811
Tel: (203) 791-3811
Fax: (203) 791-3801
A Child Waits Foundation provides low interest loans for families who have exhausted other financial options and could not proceed with their adoption without help. Visit www.achildwaits.org or contact them at
1136 Barker Rd
Pittsfield, MA 01201
Tel: (866) 999-2445
KeyBank has agreed to provide loan programs to MAPS' families at very competitive rates. If you are interested in pursuing a loan with KeyBank, you may call Jane Harmon, Relationship Manager, at (207) 874-7388 or (800) 452-8762 for more information.
Brittany's Hope has a good list of resources:
Your local bank or credit union may also be a good resource for home equity loans, lines of credit or second mortgages.
There is an abundance of information about a wide range of programs on the internet. You can find this information by doing a search using keywords "adoption financial assistance." If you explore this option be sure to use good judgment and caution by confirming the legitimacy of all programs before providing them with your personal information.
The Adoption Tax Credit
NOTE: For the most current information about the Adoption Tax Credit, please visit the IRS website. You can download Publication 968, Tax Benefits for Adoption.
The following represents MAPS' current understanding of the major features of the newly enacted Adoption Tax Credit. This summary is not a complete description of all of the provisions of the tax credit. This summary should NOT be regarded as a substitute for professional legal or tax advice. The following information may change, subject to: implementing regulations issued by the Internal Revenue Service, changes in the law and judicial constructions. MAPS strongly recommends that adoptive families consult a legal or tax professional to learn whether and how they may qualify for the Adoption Tax Credit.
The adoption expense tax credit was modified and made permanent as part of the tax bill signed by President Bush on June 7, 2001. What will this mean for adoptive families? The answers below are based on past IRS guidance and best conjecture and do not reflect official Treasury Department policy. Amounts reflect 2003 information from IRS Publication 968.
In a nutshell, what does the new law provide?
It provides a tax credit (an amount that can be deducted directly from the taxes you owe) for expenses incurred in the adoption of a child who is not the child of the taxpayer's spouse. You may also be eligible to exclude employer-reimbursed expenses from your income. All the provisions of the new law are permanent; they will not expire, as the previous tax credit law did. The limitations on the amount of income parents may earn in order to use the credit were increased: now you can take the full amount of the credit if your income does not exceed $152,390. The amount you can take decreases as your income approaches $192,390. If you earn above that figure, you don't qualify for the credit.
Details about the credit differ by type of adoption:
- For the adoption of U.S. children with special needs, the law provides that a $10,160 credit, regardless of expenses incurred.
- For the adoption of U.S. children without special needs, parents can take a tax credit of up to $10,160 for adoption expenses even if the adoption is never finalized.
- For the adoption of children from other countries, parents can take a tax credit of up to $10,160 for adoption expenses in the year the adoption becomes final.
How does the IRS define a child with special needs?
The child must be a citizen or resident of the U.S. A state must have determined that the child cannot or should not be returned to his parents' home and that the child probably will not be adopted unless some assistance is provided to the adoptive parents.
When can the credit be taken?
In general, for U.S. special needs adoptions after December 31, 2002, and for inter-country adoptions after December 31, 2001, you take the credit in the year of finalization. For U.S. non-special needs adoptions, the details are complicated but depend on the year the expense was incurred. You must file Form 8839 with either 1040 or 1040A to take the credit or exclusion.
What if your tax liability for a particular year is less than your allowable credit for that year?
If you reduce your tax bill to zero and still have credit coming to you, the unused credit amount can be carried forward to your next five tax years, or until it is all used, whichever comes first.
In international adoption, does the IRS consider the overseas adoption or the U.S. re-adoption to be the final one?
According to IRS Publication 968: When the adoption becomes final depends on the type of immediate relative (IR) visa under which the child enters the United States.
- IR-3 visa. The adoption of a child who enters the United States on an IR-3 visa is treated as final in the year the competent authority enters a decree of adoption. The competent authority is the court or other governmental agency of the foreign country that has jurisdiction and authority to make decisions in matters of child welfare, including adoption.
- Other IR visas. The adoption of a child who enters the United States on an IR visa other than an IR-3 visa is treated as final in the year in which a court of the state in which the child and parents reside enters a decree of adoption, re-adoption, or otherwise recognizes the adoption decree of the foreign country.