Adoption Financing - Part 2, Adoption Tax Credit

This post is primarily for someone who is considering adoption and has questions about the cost of adoption. It is information I wish I could have had more clearly explained to me earlier, so hopefully it will be helpful. I will outline cost information first and then some of the ways you can try and get assistance. I am basing this on Baylie's adoption. Different agencies charge different fees, but it should at least give you an idea. Also, because we were in Texas and Utah, we had some additional charges that may not apply if only one state is involved.

Costs
Physical exams - $15 co-pay x 2 parents = $30
Infant CPR Course (required in TX, but not in UT) - $30
Baby Care Basics class (required in TX, but not in UT) - $30
Fingerprinting - $101
Background check - $60.50
Birth certificates for adoptive parents - $36
Home study - $1,000
Home study Update - $350
Post placement visit - $150 x 2 = $300
Agency Match Fee (when they found us a birth mom) - $3,400
Agency Placement Fee - $15,100
Birth mother's airfare - $832
Gift for birth mother - $200
Attorney's fees (our attorney is less expensive than most) - $692
Nursery bill - $700
Copies of adoption decree - $20
Copies of birth certificate - $60

With all of the above, plus some additional fees related to a failed attempt to adopt through LDS Family Services and some expedited background checks and birth certificates, the total we paid for Baylie's adoption was $23,546. We have found this to be comparable to what other couples have paid for their agency adoptions. We did not have travel expenses as our birth mom came to Utah to deliver.

Note: LDS Family Services offers a much less expensive option; however, they get far more couples interested in adoption than they do babies. Consequently, many couples pay the up front fees without ever getting a baby. For example, we paid LDS Family Services $1,500 and will not get any of that back.

Child protective services is another much less expensive option. In fact, you often get financial assistance and health benefits when adopting through CPS. The drawbacks are that you may not be able to adopt a child you foster and it is more difficult to get an infant.

Financial Assistance
Adoption Tax Credit - One of the things I have been relying on was the adoption tax credit. Unfortunately, it turns out I was counting my chickens before they were hatched. I was under the mistaken impression that we would be getting $11,500 back from our tax return. Well, that is not exactly how it works. The adoption tax credit is just that, a credit. What that means is if we had paid $11,500 in taxes, we could get that all back. We didn't pay nearly that much in taxes. Fortunately, the tax credit can be spread over five years, so essentially now David and I will show ourselves as tax exempt until we have recuperated that amount. That's nice, but it doesn't give us the lump sum we had thought would be coming and which we thought would pay off Baylie's adoption, enabling us to adopt again. Had I realized this is how it works, I would have shown us as tax exempt once we brought Baylie home. It is wise to keep track of all your adoption expenses and have a professional assist you in filing your return.

State Adoption Indemnity - Some states allow an insurance reimbursement when you adopt. In the state of Utah, I believe it is around $4,000. This only applies if you have an insurance program that you direclty pay for. As our insurance is paid for by my employer and deducted from my salary, we did not qualify for this program.

Employer Adoption Programs - Many companies have an adoption reimbursement policy. The company I work for will give a $4,000 adoption credit. It is received after finalization and is taxed as income.

Gift of Adoption Grant - This company accepts grant applications with an application fee of $40. The grant must be applied for after a home study has been completed and before placement. We did not receive a grant for Baylie's adoption, but have applied again. Grants are approved monthly and range from $1,000 - $7,500 and average $3,500. Only about eight grants are approved each month.

National Adoption Foundation Grants - These grants are approved quarterly and range from $500 - $2,500. We did not receive a grant for Baylie's adoption, but have applied again. The foundation has a credit card available for 0% interest for six months. The foundation also has a program through onesource where online purchases can be applied towards adoption (see other post for more details).

Home Equity Loans - One of the most common methods for financing adoption is through home equity loans. Some banks even give 0% interest on home equity loans if they are for adoption. Unfortunately for us, we are trying to sell our home, so it doesn't make sense for us to take out an equity loan.

Retirement Accounts - If you decide to cash in a 401K in order to finance an adoption, any penalties that would be applied may actually be covered by the adoption tax credit.

I am certianly not an expert, and I'm learning as I go, but hopefully this information will be helpful to anyone who wants a better idea of the cost breakdown.