Lifestyle + Wellness

Planning for Adoption Costs

BY Spectrum Wealth Management | Nov 17, 2022

November is National Adoption Month, which is a month set aside to celebrate adoption and the importance of it for both children and adoptive parents. Planning for an adoption is an exciting, emotional, and sometimes stressful time. 

Let’s break down some of the costs associated with adoption, potential tax credits to consider, and how to build adoption costs into your overall financial plan.

How Much Does Adoption Cost?

When planning for adoption, one of the first things people often ask is, “how much does adoption cost?” There is no perfect answer because there are so many factors at play. Still, according to the Child Welfare Information Gateway, adoption can cost anywhere from $25,000 to $45,000, depending on the time of adoption, your location, any associated legal fees, and the birth mother’s medical expenses.1

Other adoption planning costs may include:

  • Matching
  • Case management
  • Counseling
  • Support
  • Medical expenses 
  • Legal expenses
  • Living expenses
  • Travel expenses

There are three main types of adoption: international adoption, domestic adoption, and adoption from a foster home. Each of these varies in price and requires different planning. For example, for international adoption, you need to consider travel expenses and additional immigration requirements.

Tax Credits for Adoptive Families

The good news is that while adoption is expensive, there are some financial incentives to help alleviate some of the costs. According to the IRS, there are two tax benefits for adoption: a tax credit for qualified adoption expenses and an exclusion from income for any employer-provided adoption assistance.2

Qualified adoption expenses include:

  • Reasonable and necessary adoption fees
  • Court costs and attorney fees
  • Traveling expenses (including amounts spent for meals and lodging while away from home)
  • Other expenses that are directly related to and for the principal purpose of the legal adoption of an eligible child

In addition to these tax benefits, loans and grants are available for families to help them pay adoption costs.

Building the Cost of Adoption into Your Financial Plan

Paying all the upfront costs of adoption is just one thing to consider when thinking about a lifetime of raising a child. In addition to the cost of the adoption itself, you will also have to consider ongoing costs, such as food, shelter, childcare, diapers, and other necessities. According to Bankrate, it costs more than $286,000 to raise a child in 2022. That doesn’t include the cost of higher education if your child decides to attend to a trade school or university.3

As you can tell, it’s important to build the cost of adoption into your overall financial strategy and budget for these expenses as you would with any other expenses. Raising a child is a rewarding and powerful experience but can also be expensive. If you plan to bring a child into your family via adoption, it’s good to understand these planning costs so you can be prepared.

Spectrum Wealth Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Additional information about Spectrum’s investment advisory services is found in Form ADV Part 2, which is available upon request. The information presented is for educational and illustrative purposes only and does not constitute tax, legal, or investment advice. Tax and legal counsel should be engaged before taking any action. The opinions expressed and material provided are for general information and should not be considered a solicitation for purchasing or selling any security.