Financial planning needs to be part of the equation when doing all of the work involved in bringing a new family member into your lives.
The cost of adoption can start at a few hundred dollars or it can easily exceed $40,000, according to the U.S. Department of Health and Human Services. There are many different ways of adopting a child into your home, but however your adoption occurs, you need to do some financial planning.
Biz Times' recent article, "Getting your finances ready for adoption," says that in order to get your finances ready for adoption, you have to do your homework and be certain the price and processing work of adoption won't wipe out your plans for essential financial goals like retirement, saving for your future child's education, and higher daily living expenses with a new family. Begin with these tips:
Examine your finances first. Work with qualified financial or tax professionals to review if you will be able to manage adoption costs from savings or grants you don't have to pay back. Starting a family is a major overall financial commitment—no matter what strategy you choose to build yours.
Understand the tax benefits of adoption. The federal government has tax breaks for adoption, but make sure you study and follow the rules. The IRS says that tax benefits for adoption include both a tax credit for qualified adoption expenses paid to adopt an eligible child and an exclusion from income for employer-provided adoption assistance. The credit's nonrefundable, so it's limited to one's tax liability for the year. Any credit in excess of tax liability can be carried forward for up to five years. In addition, adoptions of special needs children may qualify for special tax treatment.
Look into workplace benefits. A recent study showed that about 12% of U.S. employers offered a financial adoption benefit in 1990, compared to 52% now. See if your employer offers adoption benefits and factor those benefits into your overall financial plan.
Gauge your legal costs. This is a legal process, and based on the type of adoption process you pursue, you'll need to consult with an attorney to make sure your application is in order and your rights are protected.
Networking and education. A huge leg up on the entire process is getting involved with support and planning groups for parents of adopted kids and those who are planning to adopt.
Get your new family started on the right foot by ensuring that you have a sound financial plan in place. This will give you and your family the ability to focus on all the joys that a new family member can bring into your lives.
Reference: Biz Times (May 3, 2016) "Getting your finances ready for adoption"