The decision to adopt a child has lifelong implications, both emotional and financial. While adopting through foster care can be inexpensive, pursuing a private adoption is an expensive endeavor with one-time costs ranging up to $70,000 according to some sources. Families looking to fund adoption expenses may seek additional sources of income, such as selling investments or temporarily taking on additional work. They may also consider whether both parents will work outside the home long term.
The Journal of Accountancy also points out that aside from other various federal benefits, there may be state tax benefits for adoption as well.
The Journal of Accountancy has some recommendations for parents considering adoption. Most notably, “some of the tax benefits available to adoptive families apply to parents generally. Specifically, parents with a qualifying child under the age of 17 for whom the parents are allowed a Sec. 151 dependency deduction are eligible for the child tax credit (CTC), and working parents who pay for the care of a qualifying child under age 13 are eligible for the child and dependent care credit (CDCC). For tax years 2022 through 2025, the maximum CTC is $2,000 per qualifying child. For tax years after 2025, the maximum CTC is $1,000 per qualifying child. The CDCC for 2022 and after is 35% of qualifying expenses, with maximum allowable qualifying expenses of $3,000 for one qualifying child and $6,000 for more than one qualifying child. Thus, the maximum CDCC is $1,050 for parents with one qualifying child and $2,100 for parents with more than one qualifying child.”
The Journal of Accountancy also points out that aside from other various federal benefits, there may be state tax benefits for adoption as well. While Illinois does not provide any state tax benefits for adoption, the same cannot be said for neighboring states Iowa, Missouri, and Indiana. Those states provide various benefits to adoptive parents, but interested parties should check more about other state specifics.