Politics & Policy

Save the Adoption Tax Credit

Without this subsidy, many parents cannot afford to adopt.

For thousands of American children in the foster-care system, life will become even more hard-knock on January 1. That’s when the adoption tax credit expires.

Unlike most subsidies, the adoption tax credit makes sense. It helps American children who are trapped in foster care find permanent homes in lower- to middle-class families, and it also reduces the financial strain on taxpayers.

At least one-fourth of the 408,000 children in the American foster-care system are hoping to be adopted, according to statistics from the federal government. And, according to the not-for-profit Evan B. Donaldson Adoption Institute, about 68 percent of all American adoptions involve children in foster care.

Yet one of the most significant barriers to adoption is cost; Adoptive Families magazine found last year that the average cost of an adoption was $30,000.

Enter the tax credit, first created in 1997. This year, most adopting families can claim $12,650 of the expenses they incurred — less than half their overall cost, but still decisively important, according to the Adoption Institute

Many parents report they could not have afforded to adopt without a subsidy.Among adoptive and prospective adoptive parents of foster children in a multi-state study, most (81%) say subsidies were important to their decision to adopt and more than half (58%) that they could not do so without them.In a study of success factors associated with families’ adoption of children from care, two-thirds (66%) of parents said they needed the subsidy to be able to adopt.The top barrier to foster care adoption cited by African American families is the lack of financial resources to support additional children.

Adoptive parents and foster kids aren’t the only ones who benefit, either. The same Adoption Institute report notes:

Monthly adoption subsidies are $100–$150 lower than foster care payments. … Research shows that adoption yields cost savings versus foster care. One economist found that every dollar invested in adoption of a child from care returns about three dollars in public and private benefits.Another study concluded that the government cost savings for the 50,000 children adopted annually from foster care ranges from $1 billion to $6 billion.

The tax credit is clearly good policy. Nevertheless, its days are numbered unless Congress acts fast.

Next year, adopting families will get tax credits of only $6,000 — and only if they choose a foster-care child with special needs. When it comes to tax credits, all the other kids in the foster-care system get ignored. Meanwhile, lower income limits for the tax credit means that fewer families will be eligible to receive compensation.

Bills to renew the adoption tax credit have been introduced in both the U.S. House and Senate. Yet, despite bipartisan support, the likelihood of their passage is debatable.

For the sake of all the children trapped in the foster system, and for all America’s hopeful parents-in-waiting, this is one tax policy that deserves priority.

— Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for Government and Public Integrity.


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