Sunday, November 4, 2007

Adoption on the Cheap

November is National Adoption month.

Given that this is a personal finance blog, and given that I adopted five daughters without spending a dime for the adoptions, I think it is time to dispense with some of the financial myths surrounding adoption expenses.

The biggest myth is that adoption is prohibitively expensive. It can be, of course. Adopting.Org reports that a private adoption of a healthy, white infant can cost anywhere from $8000 to $30,000. International adoption runs a close second, from $7,000 to $25,000.

But I adopted each of my children from state foster care. Not only did I not pay anything for the adoptions, the state reimbursed me for the travel costs involved in meeting with my children and their social workers, and continues to give me an adoption assistance payment each month. Each child was also covered by Medicaid until age 18. (I put my kids on my own insurance plan when they came into my home, but having them on Medicaid meant I never had co-pays.) Health insurance companies are required to put your adopted children onto the policy as of the date of placement in your home, even if the adoption itself doesn't take place until later. Also, healthcare providers that don't routinely take Medicaid usually will make an exception when your family is already being treated through your employer's policy.

A number of employers (not mine, unfortunately) offer adoption benefits that are much like FLEX plans. Specific adoption expenses come out of pre-tax income. If your employer does not have such a program, it may well be worth your time to check this benefit out and present it to your employer as something they might like to offer. The big selling point is that because the employer will not have to pay FICA on pre-tax income, and because those FICA payments are usually more than what private FLEX firms charge to administer plans, the benefit is revenue-neutral for the employer. If your company already offers FLEX medical and childcare, call the administrator to see if they can handle adoption benefits as well.

There are also substantial tax benefits to adoption. These are available for all adoptions, whether domestic or international, but they are higher and better for anyone adopting out of foster care. Check out the IRS website for Forms and Instructions (Form 8839) to claim the tax credit. For one child, it is currently $10,960. It can be spread over more than one year. If the adoption is international, the credit cannot be claimed until the adoption is finalized. However, for a domestic adoption, there doesn't even have to be an adoption as a final result, provided the expenses were incurred as part of an adoption process.

For the adoption of a special needs child (and keep in mind that a "special need" can be as minor as a child being African-American, or over six years old, or part of a sibling group, or having a family history of mental or inheritable physical illness), one does not even need to have incurred that much in expenses to take the credit.

That's right--at least on the front end, one can actually make a profit on the adoption.

With my usual stellar timing, I adopted for the final time the year before that particular provision of the tax code was passed. So, no profit for Grace, unless you count the addition of five very special girls to my family as a profit.

Come to think of it, I do consider that a profit. And a blessing.

6 comments:

mariam said...

Thanks for sharing your experiences, Grace. Very informative and sheds light on adoption myths.

Anonymous said...

Very nice post, Grace. I enjoy reading your blog. I also have 2 internationally adopted kids - the lights of my life.

Kid yourself - Adopt!

SavingDiva said...

Thank you for being so open with the adoption process. I've never read anything about this form of adoption.

Anonymous said...

I have adopted 3 kids thru NY States Foster to Adopt program- with one more pending.

I always knew I wanted to parent- but not necessarily "have" kids. When we started looking for agencies to work with- one had counseling for fertility grief as a necessity. We laughed at that- since it was nothing we wanted. We knew that it would not be a good fit- so we ended up working with our counties program.

The funniest thing was we were told we would never see any babies coming our way. We had our spare room equipped and ready for some fictional young child of about 5- with bunk beds. Wouldn't you just know we've gotten every child directly from the hospital as a newborn? Half the struggle with child #1 was taking down all the kids stuff and running around to get baby things!

zara hemla said...

Just passing through, but this is so interesting! Do you have any more info on adopting through the state? Websites to look at, that sort of thing? I live in CA and have two kids but would like to adopt. I thought we'd have to save for years & years to get enough money. How do I go about researching this?

Millionaire Mommy Next Door said...

Great information, Grace.

We adopted our daughter (from China) last year. I've been asked, "How much did she cost?" several times. Ouch. I know the askers don't intend to sound so crass. I explain that the tax credit reimbursed most of our adoption fees; we paid for our fantastic 18 day trip to China.

I'm surprised, but it still seems necessary to inform people that you don't buy a child. You pay for various services.

The tax credit makes adoption more accessible to many more families.