Tax Credits, Loans and Grants for Foster Care Adoption

Adopting a child can be, and often is, expensive. Because it’s easy for costs to add up, it’s understandable that many families start to wonder about financial assistance. But, what kind of adoption assistance are foster parents eligible for? Families that welcome a foster child into their home may have the opportunity to adopt that child later. So, they often ask “Can I receive a tax credit for adopting a foster child?” and “Are foster parents eligible for adoption grants and loans?” The answer to both of these questions is yes. Foster care may be the most affordable type of adoption, but it doesn’t mean that families should go into this process financially unprepared. To learn more about foster care adoption and tax credits, grants and loans, keep reading.

What Kind of Foster Care Adoption Assistance Can I Receive?

Foster care is by far the cheapest way to build a family through adoption. Average costs can land anywhere from $0 to $1,500. Foster care adoption assistance plays a huge role in this, as well as other factors. During the foster period prior to adoption, foster families can receive an adoption subsidy once a month to supplement the cost of caring for their child’s needs. This assistance is considered non-taxable income provided by the government. In many situations, foster parents are also able to receive a reimbursement to put toward their upcoming adoption expenses, like the home study (completed before child placement) or court costs. You should always remember that the major costs of a foster care adoption will be covered by the state. This means that foster care adoptions cost little to nothing, even without grants for foster care adoption and loans. Before starting your process, make sure to research the cost of foster care adoption in your state.

What is the Federal Adoption Tax Credit?

When people talk about receiving a tax credit for adopting a foster child, they’re referring to the federal adoption tax credit. The federal adoption tax credit is intended to help adoptive and foster-to-adopt families offset the costs of their adoption. This adoption tax credit for foster care adoption allows adoptive parents to claim all adoption expenses, including necessary fees, travel expenses and court fees. This tax credit is non-refundable, so you can only use the credit if you have a tax liability for the year you adopted your child. To learn more about the adoption tax credit, please speak with a tax professional.

Is there Extra Financial Assistance for “Special Needs” Children?

Many of the children in foster care can be classified as “special needs.” This is a broad term, but it simply means that they have characteristics that make it harder for them to find loving homes. It also means that they’re eligible for adoption assistance, including the foster care adoption tax credit, which makes finding placement for them easier. What qualifies a child as special needs can vary by state, but it typically means that they:

• Are an older child
• Are part of a sibling group that must be placed together
• Have a medical condition
• Have a physical, mental, or emotional disability

If your foster child qualifies as “special needs” they’re automatically eligible for the maximum tax credit for an adoption from foster care, regardless of their adoption expenses. But, according to the 2018 adoption tax credit guidelines, an adopted foster child must meet all three of these requirements to receive credit:

1. The child was a citizen or resident of the United States at the time of the adoption.
2. The state has determined that the child can’t and shouldn’t be returned to their biological home.
3. The child will not be adopted unless assistance is provided to the adoptive parents.

This means that foster parents are encouraged to adopt children who would otherwise have a difficult time finding safe, stable and permanent homes. To learn more about adopting a child with “special needs” and the foster child adoption credit, please contact your local agency.

Grants Available to Foster Parents

The adoption-from-foster-care tax credit isn’t the only way to receive adoption assistance. Many new parents are also eligible to receive adoption grants.  The best thing about grants it that you don’t have to pay them back. So, you should apply for as many as you can! Here are a few of the grants for foster care adoption available to foster-adoptive parents.

• National Adoption Foundation
• Help Us Adopt
• Reece’s Rainbow Special Needs Adoption Support

There are plenty of grants available to help make a foster care adoption possible.  Take some time to see what other grants you’re eligible for as you’re getting started.

Loans Available to Foster Parents

Even with financial assistance and grants for foster care adoption available, some families still find themselves struggling to cover the costs associated with adoption. As you’re preparing your home, getting the medical supplies you need for a special needs child and gathering other necessities, you’ll see how quickly costs can add up. So, what should you do? In this situation, many families turn to adoption loans. Choosing to finance your adoption through this route is a very personal decision, so you should think carefully before you decide. If you’re having trouble getting started, don’t forget that you can always talk with a financial advisor for more information. Like with any kind of loan, you should only take one out if it’s absolutely necessary. If this is the right route for you, here are a few options to consider:

• USAA
• Abba Fund
• LightStream
• SoFi

If you have any other questions about the foster child adoption credit, please contact your local foster care agency or caseworker for more information.