Understanding the cost of adoption

Review potential adoption costs and strategies for managing these expenses.

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Adopting a child is an exciting time for any family. While the path towards adoption can be unpredictable, the cost of adoption is something you can begin to plan out. The costs often vary depending on what adoption process you're looking at: through the foster care system, a domestic adoption agency, a domestic attorney, or an international adoption agency. Here's a closer look at a few potential adoption costs and strategies for lowering these expenses.

Adopting through foster care

The US Department of Health and Human Services, Administration for Children and Families, Administration on Children, Youth and Families, Children's Bureau reports that over 100,000 foster kids were waiting to be adopted as of September 30, 2016.

If you choose to adopt a foster child, you may have to pay upfront for a home study to verify that you're a suitable parent. However, legal costs for adoption through foster care are generally covered by the state or county, so you won't have many other expenses should you choose this route. Many children adopted through the foster system also receive a medical or financial subsidy from the state, bringing down your overall cost.

Domestic adoption

There are two main paths to adopting a baby already in the US: agency adoption and attorney adoption. When you adopt through an agency, a single organization matches expectant mothers and potential parents. The agency may also recommend an attorney to finalize the adoption. If you've already found an expectant mother, you can opt for an attorney adoption, where you hire a social worker to do your home study and an attorney to handle the legal paperwork.

According to Adoptive Families' 2016 adoption cost and timing survey, the average cost for an agency adoption is $41,532, which includes the home study fee, attorney fees, travel expenses, birth mother expenses, and other costs. The average cost for an attorney adoption was $34,594, but neither figure includes situations where you start the process and the adoption falls through, so make sure to take that into consideration should you opt for either of these scenarios.

International adoption

For international adoptions, travel can be a significant expense. The costs vary depending on the country, as some countries may require multiple visits or waiting periods before you can bring a child home. Adoptive Families' 2016 estimates that the average cost for adopting a child from South Korea was $46,412, while adopting a child from China averaged $36,070.

Once you've chosen an adoption option, there are many ways that you can offset your upfront costs. Below are some strategies to consider to help lower your total cost:

Military adoption benefits

If you or a spouse is serving in the military, you may qualify for to $2,000 per child or up to $5,000 per year in reimbursements for qualifying adoption expenses. Travel costs are not eligible for reimbursement but placement fees, birth mother expenses, court costs and legal fees are. To receive this benefit, be sure you file DD Form 2675 within a year after the adoption is finalized.

Workplace adoption benefits

Did you know you could also get financial help from your employer? An employee benefits report from the Society for Human Resource Management found that in 2017, nine percent of employers surveyed offered adoption assistance to employees and 23 percent offered paid adoption leave. If you're unsure whether your employer has this benefit or not, schedule some time to sit down and talk with HR. If your employer provides adoption assistance, this benefit is generally not taxable as income. Even if workplace adoption benefits are not offered, there might be other ways in which your employer can help you during the adoption process.

Adoption tax credit

The current code allows adoptive families who fall below income limits to receive a tax credit for unreimbursed adoption expenses, including court costs, attorney fees, and travel expenses. For 2018, the maximum credit is $13,570 per eligible child, and you can multiply the credit if you adopt multiple children in the same year. You can't get a tax refund from this credit (it cannot exceed your tax liability), but you can carry any excess credits forward for up to five years to lower your future tax bill. The Adoptive Families' 2016 report found that just under a third (31 percent) of adoptive parents surveyed claimed the adoption tax credit. If you qualify, it's a credit that is certainly worth looking into.

These are not the only ways families can save money during the adoption process. Some adoptive parents receive financial help from family or friends, raise funds online, or apply for adoption grants. Just as there's no single path to building a family, there's no one way to pay for adoption. Considering all of your available options will help you make the decision that's best for your family.

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The statements and opinions expressed in this article are those of the author. Neither Fidelity Investments nor your employer can guarantee the accuracy or completeness of any statements or data.

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