November 17th is National Adoption day, and while adopting a child is one way to grow a family, it can be very expensive – with significant upfront costs. When you factor in travel and time off from work, the costs can run even higher. And for gay, lesbian and bisexual couples seeking to adopt a child, they may face special financial and legal hurdles.
If you’re considering adopting a child, whether in the United States or abroad, explore your resources and consider alternatives that can make the adoption process more affordable.
Employer adoption benefits
Some employers offer an adoption benefit as part of their employee benefits package. These “adoption-friendly” perks may include partial reimbursement of adoption fees as well as paid time off to complete the adoption process. Talk to the human resources contact where you work to review the benefits available to you.
Changes in the Adoption Tax Credit
Unless something changes at the federal level, the Adoption Tax Credit will no longer apply in 2013. For the remainder of 2012, adoptive parents may be eligible for a tax credit up to $12,650 to help offset the high cost of adoption. But if congressional action isn’t taken to extend this tax credit, starting in 2013, it will be reduced to $6,000 and will only apply to special needs adoptions. If you’re beginning the adoption process now, you may be eligible for full or partial credit even if your adoption is not completed before the end of the year, but you will be required to provide documentation of your qualified adoption expenses to earn the credit.
Special needs and foster care adoptions
Many states offer additional financial incentives to encourage special needs adoptions or the adoption of older children waiting in foster care. If you are planning to adopt a special needs or older child, find out under what conditions your state offers this financial help. You can find information for your state online at the Child Welfare Information Gateway.
Borrowing to adopt
If your credit is in good shape, you may be able to get an adoption loan to help with the costs of the adoption. You may also consider alternative borrowing options, but be careful about overextending yourself, as adding a child to your family will raise your cost of living. Daycare expenses will also impact your family’s finances, and income-earning potential can be affected if one parent chooses to stay at home or take a job that is less demanding so he or she can be more available for child care.
If you are worried your finances fall short to complete an adoption today, consider what it would mean to postpone your adoption plans. You can try to increase your income by reducing expenses where you can and budgeting carefully. Find out if organizations you’re involved in will provide financial assistance. Search for private grants and put the word out that you are in need of financial help, and you may just find it.
The importance of financial planning
The cost of adopting a child begins when you initiate the adoption process, but it certainly does not end there. Raising a child is costly too. An experienced financial planner can help you examine your finances and make plans to achieve the goals you have for you and your family, now and in the future.
Jose Vicente, CFP®, CLTC is a Financial Advisor and Business Financial Advisor with Ameriprise Financial Services, Inc. in Saddle Brook, NJ. He specializes in fee-based financial planning and asset management strategies and has been in practice for 7 years. To contact him, http://www.ameripriseadvisors.com/jose.x.vicente, (201) 221-2700 ext.2705, 250 Pehle Ave. Ste 500, Saddle Brook, NJ 07663. Ameriprise Financial and its representatives do not provide tax or legal advice. Consult with your tax advisor or attorney regarding specific tax issues. Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. © 2012 Ameriprise Financial, Inc. All rights reserved. File # 146742