Aid is Available to Help Ease Adoption Burden
Suzzanne Ippel knows how expensive it can be to adopt a child. When she and her husband adopted a son and a daughter four years ago, they had to refinance their house to come up with the cash required to complete the process.
But luckily for them, there’s economic help available to adoptive parents from a variety of sources, including employers and the federal government.
Suzzanne’s employer Intuit Corp., for example, reimburses up to $3,500 of the expenses required to adopt each child and provides paid time off and immediate health coverage for the new family members.
For Ippel’s family, that benefit was worth $7,000 and a month of paid leave for Suzzanne.
“It was a godsend,” said Ippel, a human resource manager based in Tucson. “When we finally sat down to figure it all out, the total cost was over $20,000 -- and the costs didn’t quit when we got the kids home.”
Intuit is among a growing number of big companies that provide adoption assistance that can be used in conjunction with federal tax breaks and, sometimes, state grants, to offset the often high cost of adoption.
Ippel and her husband also were able to claim federal tax credits that reimburse parents for qualified adoption expenses, which at the time of their adoptions was worth as much as $5,000 per child. All told, they eventually were reimbursed by Intuit and the federal government for $17,000 of their initial costs.
Roughly 100,000 parents adopt in the U.S. each year, spending as much as $40,000 in the process. Money to reimburse some of the costs is increasingly plentiful, although the source of the money and how much is available depends on the type of adoption, where the parents work and how much they earn.
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Company programs
Adoption assistance programs for employees have become more common and more generous in recent years, according to annual surveys conducted by Hewitt Associates in Chicago.
Roughly 39% of the big companies Hewitt surveyed this year offered adoption assistance programs. That’s up from 36% last year and 31% in 2000. The average amount of cash assistance has also climbed from $3,100 five years ago to $3,879 in the most recent survey, according to Suzanne Zagata-Meraz, a Hewitt spokeswoman.
The appeal of these payments for employers is that, like pensions or health benefits, they are tax deductible for the company (and generally not taxable for the employee). They also help companies differentiate themselves from other employers while competing for workers.
The level of employer-provided assistance varies dramatically, however, according to the Department of Health and Human Services, which sponsors the National Adoption Information Clearinghouse. Some companies offer simple information and referral programs, while others will provide cash grants of as much as $15,000.
A program called the Adoption Friendly Workplace, sponsored by the Dave Thomas Foundation for Adoption, has a website with a listing of companies that provide adoption assistance programs: www.adoptionfriendlyworkplace.org.
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Federal tax breaks
The federal government has been providing tax benefits to adopting parents since 1997. These benefits have become increasingly generous over the years, jumping from a maximum credit of $5,000 to $10,630 per child today.
With a standard adoption, the credits can be used simply to offset “qualified” expenses, which include legal bills, travel expenses, adoption fees, medical bills and all other payments necessary to complete a legal adoption, said Mark Luscombe, principal tax analyst with CCH Inc., a tax service based in Riverwoods, Ill.
But with so-called “special needs” adoptions -- involving children who are difficult to place due to age or disabilities, for example -- the credits can be taken regardless of how much the parents spent to adopt.
In other words, if the adoption of a child with special needs cost only $1, the new parents could still take the full $10,630 tax credit.
The credit can’t be used to generate a tax refund , but it can be carried over into future years, said Cindy Hockenberry, tax information analyst with the National Assn. of Tax Professionals in Appleton, Wis.
So if a family owes just $5,000 in federal income tax in the year of an adoption, it can wipe out that year’s tax bill and use the remaining adoption credit to eliminate as much as $5,630 in income tax in the following year as well.
A tax credit is a dollar-for-dollar reduction in the tax that you pay, Hockenberry added. That’s considerably more valuable than a deduction that simply reduces the individual’s taxable income.
Adoption credits generally are taken in the year that the adoption is final. But if an adoption drags on -- or fails -- the credits can be used to offset adoption-related expenses in the year after the year the expenses are incurred, Luscombe said.
The one caveat: Families with more than $159,450 in adjusted gross income, including foreign-earned income, lose a portion of the credit.
Families with adjusted gross income above $199,450 cannot claim the credit.
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Other assistance
Private adoptions can be costly, but those who go through the public social service system often pay little, if any, cash out of pocket, said Joey Nesler, psychotherapist with the Kinship Center in Santa Ana, which works with adopted children.
In fact, parents can often qualify for adoption assistance payments, as well as medical coverage, she said. Adoption assistance payments, which can last until the child reaches age 18, vary widely depending on the child and the parent’s needs. California’s public adoption website, www.cakidsconnection.com, says that virtually all children adopted through the foster care system in California qualify for financial assistance.
The catch: The public system is jammed with kids, but few of them are healthy babies or toddlers, Nesler noted. Many are older children who have been taken from abusive or neglectful parents. These children may require more medical and psychological attention than babies adopted through private means.
“But when you adopt through the county system, you get a lot of help,” Nesler said. “We have pediatricians, tutoring, psychological counseling, pre- and post-adoption training.”
More information about adopting can be found at www.adoptuskids.org.
