Adoption can be an incredibly expensive process, but luckily there are programs available to help offset these costs through the federal and state governments, as well as private entities.
Federal Tax Credits
Individuals are eligible for a tax credit against their federal income tax for qualified adoption expenses. These adoption expenses include:
- Adoption fees
- Attorney fees
- Court costs
- Travel expenses
- Other expenses directly related to, or for the principal purpose of, the legal adoption
- Expenses paid before identifying an eligible child, such as home study fees
There are exclusions to these qualified expenses, such as if they are for stepparent adoptions or if these costs were already paid for by another program. The amount of credit may also vary based on individual circumstances. If you are adopting a child with special needs, you may be able to claim the maximum adoption credit, even if you have incurred no out-of-pocket expenses.
Wisconsin State Tax Incentive
Each state has its own approach to any tax incentives associated with adoption, but Wisconsin allows up to $15,000 spent on adoption expenses to be subtracted from your income. If you adopt more than one child in a taxable year, you may subtract up to $15,000 for each adopted child. This, while not a tax credit, is a way to reduce your tax liability.
Government Financial Assistance
Various programs exist at federal and state government levels that assist, though these programs are typically reserved for supporting adopted children with special needs or children adopted from the foster care system. If a child is eligible for this assistance, it typically comes through in monthly subsidies, medical coverage, or a one-time reimbursement for medical expenses.
Private Financial Assistance
There are numerous financial assistance programs that are offered through various organizations. Some non-profit organizations offer grants or low-interest loan options for adoption costs. It is also common for employers to offer adoption-specific benefits, such as paid leave or reimbursement of adoption costs.
Navigating Options
With the many expenses that come with adopting a child, it is important to have a complete understanding of the various ways that you can reduce the financial impacts. An adoption attorney can help you determine what programs, credits, or benefits you may be entitled to. To speak with an adoption attorney, please reach us by calling 608-784-8310 or reach us via email.