Senators want to enhance the adoption tax credit

September 28, 2023

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The financial challenges American families face have gotten a lot of attention recently.

Notably, Congress is (still) fighting over (among other things) whether to expand the Child Tax Credit to levels enacted during the COVID-19 pandemic.

But even as that tax and fiscal policy struggle continues, some lawmakers have set their sights on another family-friendly benefit. Two U.S. Senators want to tweak a tax credit to provide more financial help for families that adopt.

Senators Bob Casey (D-PA) and Kevin Cramer (R-ND) on Sept 21 introduced the Adoption Tax Credit Refundability Act, S. 2895.

It is the upper chamber's version of the identically dubbed H.R. 3662, sponsored by Rep. Danny K. Davis (D-Illinois), who has introduced similar measures in prior sessions of Congress.

This latest effort would, as the name indicates, make the adoption credit more valuable.

Current tax help for adoptive parents: The adoption tax credit currently is worth $15,950. That can help make a dent in the often-exorbitant adoption expenses.

Adopting a child from a private agency can cost anywhere from $30,000 to $60,000, according to a report from the Children's Bureau, an agency under the U.S. Department of Health and Human Services (HHS). These costs include fees for a home study, court and legal fees, counseling and medical expenses, interim child care and postplacement supervision. Independent adoption, says the report, can cost prospective adoptive parents $25,000 to $45,000.

But since the credit in not refundable, some new parents lose some of its nearly $16,000 (this year) value.

Refundable credit's tax bonus: Like all tax credits, the adoption tax break reduces the amount of tax you owe dollar-for-dollar.

But when it was made permanent in 2013 as part of the American Taxpayer Relief Act, the credit's refundability, which expired in 2011, was not reinstated.

So, since the adoption tax credit remains nonrefundable, any qualifying credit amount that is more than what a taxpayer owes is wasted. They can only get the credit to cover any tax due.

Encouraging a broader adoption base: In the release announcing the proposed changes to the adoption tax credit, both Senators emphasized that their bill's goal is to encourage prospective families to adopt.

They say that restoring the refundable portion of the federal tax credit's financial support and making thousands of adopting families newly eligible for the full credit, more might be convinced that they can afford to adopt.

"Shifting it from nonrefundable to refundable will allow families who experience the joy of adoption to take full advantage of the credit, regardless of their tax burden," said Cramer.

The senators also pointed out that the change would mean more people, and especially those who make less money, would be able to take fuller advantage of the adoption tax credit.

They cited Department of Health and Human Services (HHS) data which shows one-third of all adopted children live in families with annual household income at or below 200 percent of the poverty level.

Also, 62 percent of families eligible for the adoption tax credit made too little to fully benefit without refundability. Also, one-third of adopted children live in households with annual income at or below 200 percent of the poverty level.

"The Adoption Tax Credit has been a proven success in increasing families' ability to offer permanent homes to adoptive children and this bill will allow more families to experience the joy of expanding their family through adoption," said Casey.

Adoption data and help: And there are lots of youngsters waiting for a forever home.

AdoptUSKids estimates that of the 400,000 children in foster care, approximately 117,000 are waiting to be adopted. They range in age from infants to, in some states, 21 years old.

If you want to open your heart and home to one or more of these children, even before the adoption tax credit is made refundable, the following organizations offer some guidance.

State adoption laws — Adoption is a legal process for creating families. States have varying laws that govern the process. Here you can find information and resources where you live regarding who can adopt and be adopted, consent to adoption, rights of presumed fathers, intercountry adoption, access to family information, and more.

AdoptUSKids — This national project that supports child welfare systems and connects children in foster care with families. AdoptUSKids compiles information about support services for adoptive families. You can also find specific post-adoption resources in your state.

Center for Adoption Support and Education (C.A.S.E.) — Here you'll find a directory of approximately 1,800 therapists who can help pre- and post-adoptive families searching for adoption-competent therapists.

Creating a Family — The extensive adoption resources at this site include information on costs and financing.

Adoption Center — Prospective adoptive families can find a variety of resources on adoption and foster care.

National Adoption Foundation — This group offers adoption grants, loan programs, and adoption insurance.

North American Council on Adoptable Children (NACAC) — Here you can find info on state adoption subsidy programs, as well as information on negotiating for an adoption subsidy. NACAC also provides information on adoption tax credits.

National Foster Care and Adoption Directory — This is a compilation of public and private adoption agencies and adoption program managers for every state, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

All of these resources help families grow by adding embracing children who need of a home. And that helps not only the youngsters, say the bill's sponsors, but also all of us.

"The more children who are adopted by loving families, the better off our nation is," said Casey.

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