For National Adoption Month, I’ve covered the importance of adoption and how the process works. But I couldn’t leave the topic without exploring one of the most important parts of the process: preparing financially. With adoption, you will likely spend tens of thousands of dollars on top of the already hefty cost of raising a child.
I want you to go into the process with your eyes wide open and be prepared the best you can. Taking the following three steps will get you well on your way.
Know the Costs
As in most situations when you’re making a significant financial investment, you have to know what costs you will incur. Depending on the adoption process you choose, getting a child can run you a little as nothing, if you are adopting from foster care, to $40,000 if you adopt internationally.
In addition to the costs of the adoption, you need to consider what you will have to buy in order to make your house suitable for a child. Do you have an adequate room and furniture? If you’re adopting an infant, do you have a proper stroller and car seat? You should price out all of these things beforehand, so you can anticipate how much cash you will need and when you will need it.
Track Your Spending
Frequent readers know that I firmly believe in tracking your spending. It’s one of the most important steps you can take to gain control of your finances. And it’s even more important when you’re adding a new major expense to your budget.
Knowing what is coming in and going out will afford you the most flexibility in making adjustments to your spending. You can easily balance what expenses you need to pay versus what you can give up or cut back. With so many tools to help you, tracking your spending has never been easier.
Take Advantage of Your Benefits
Although it can cost a lot of money to adopt, several benefits exist that can offset some of the costs. The most widely known is the adoption tax credit. This is a non-refundable credit (meaning it only benefits you to the extent of your tax liability) for qualified adoption expenses. These expenses included:
- Reasonable and necessary adoption fees,
- Court costs and attorney fees,
- Traveling expenses (including amounts spent for meals and lodging while away from home), and
- Other expenses that are directly related to and for the principal purpose of the legal adoption of an eligible child.
For 2015, you can receive up to $13,400 per child. There are income limitations and other special considerations, especially if you adopt a special needs child. Check out tax topic 607 and the instructions on Form 8839 for more information. I also suggest consulting with your tax advisor to see how the credit fits your particular circumstances.
In addition to the adoption tax credit, you can take advantage of several other subsides. Many employers offer adoption assistance either through up front payments, paying certain fees, or partially reimbursing expenses. Many states also offer subsidies, depending on the background of the child you adopt. Or you may find that you qualify for adoption grants from a foundation. Either way, you should explore all of the advantages open to you to offset some your upfront costs.
You’ll likely never be fully prepared for the financial and emotional aspects of adoption. Hopefully these last few posts have given you an idea of what is coming your way and how you can get ready.