Financial Benefits for Adoptive Parents: Federal Tax Credits and Adoption Subsidies

Numerous financial benefits exist for adoptive parents. The following will familiarize you with some terms and tell you how to find help in this complicated subject.


The two major financial benefits available to adoptive parents are federal tax credits and adoption subsidies. A federal tax credit is a reduction of your federal income tax in the year in which you adopt a child. The conditions for claiming this credit are complicated depending on many factors such as the year of the adoption, whether or not the child has special needs, and how much you spent on adoption expenses. Adoptive parents who did not take the federal tax credit may be able to go back as far as 2003 to benefit from the credit. For the years 2010 and 2011 the tax credit became refundable, meaning that you will get the amount of the credit back regardless of how much you paid in income taxes. For detailed current information on the federal tax credit, go to Adoptive parents are wise to explore this issue on their own since many tax preparers seldom or never deal with this issue and may be unfamiliar with the complicated conditions. An adoption subsidy is assistance provided for children with special needs as an incentive to help get children adopted. It may include ongoing financial aid, medical coverage, or other services such as respite care or therapy. Adoption subsidies should be negotiated prior to the finalization of an adoption. To understand adoption subsidy you need to be familiar with many related terms. The nacac web site defines all these terms for you: adoption assistance; Title IV-E, non-IV-E, AFDC, SSI, non-recurring, means testing, Title XX, specialized rates, fair hearings, EPSDT, subsidized guardianship. Adoptive parents need to familiarize themselves with these terms and with the whole issue of adoption subsidy. Case managers may give you their own opinion as to whether you qualify for adoption subsidies, but they do not have the final word. The judge at the final adoption hearing does.

How to Find Help

The North American Council on Adoptable Children (NACAC) provides extensive and up-to-date information on tax credits and adoption subsidies, as well as many other issues affecting adopted children. Web site: Address: North American Council on Adoptable Children (NACAC); 970 Raymond Avenue, Suite 106; St. Paul, MN 55114; Phone: 651-644-3036 Fax: 651-644-9848 E-mail: [email protected]. NACAC’s Adoption Subsidy Resource Center Phone: 800-470-6665 or 651-644-3036 E-mail: [email protected]