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Eliminating the adoption tax credit would harm Americans, financially and socially

Eliminating the adoption tax credit would harm Americans, financially and socially
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The recent tax bill, entitled the Tax Cuts and Jobs Act, includes the elimination of many tax deductions and credits. Originally, there was an intention to include the adoption tax credit in this sweeping elimination of tax credits. For those contemplating adoption, a repeal of the adoption tax credit would have been life-altering for many prospective adoptive parents, potentially eliminating their ability to begin or expand their families.

As a proud adoptive mother of two, I’m acutely aware of the costs of adoption. Adoption isn’t cheap. Costs range from $20,000 to $50,000, with many adoption cost layers extending well beyond traditional agency and attorney fees. The current tax credit of up to $13,570 (depending upon your Modified Adjusted Gross Income) allows many individuals to defray lofty adoption costs, thereby broadening the number of homes open to children in need.

Before the potential loss of the adoption tax credit, a staggering 87 percent of people who said they considered adoption said the only reason they didn’t do it was because it cost too much money. Sadly, this statistic is now likely to rise.

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Today, a modest cost for adoption is $25,000. If your adoption costs this much and you qualify for the tax credit, your out-of-pocket costs are just over $11,000. Without the adoption tax credit, however, costs would have effectively doubled for some people, making adoption unattainable for many prospective parents.

 

Whenever you enter into adoption (or parenthood for that matter), you need to be prepared for surprises — emotional, medical, and financial. This means that adoptive parents need to be prepared for unexpected expenses that could place their adoption costs at $50,000, or higher. If you need to save $50,000 and you pay 33 percent in taxes, you need to set aside $75,000 of pure earnings, before paying any of your bills, in order to afford adoption. Not many people can simply carve out that amount of income to begin a family, plus the additional costs of raising a family, sending your children to college, and more. 

While the baseline cost impacts of abolishing the adoption tax credit are important, so too are the broader social ramifications that could have ensued. These effects could be far more significant and widespread, and warrant careful consideration before eliminating the adoption tax credit.

  • Social Affluence: As stated above, 87 percent of people who said they consider adoption stated that the only reason they didn’t do it was because it cost too much. This demonstrates that the financial ability to adopt is already limited based upon economic affluence. Abolishment of the adoption tax credit would only make it more difficult for middle-class Americans to adopt children who desperately need loving homes. The potential of limiting adoption affordability to the financially elite has serious societal impacts.
  • Racial Considerations: Additional financial hardships stemming from abolishment of the adoption tax credit would likely increase the number of transracial adoptions, due to race-income inequalities. As reported in Forbes, a recent study by Prosperity Now and the Institute for Policy Studies shows the dramatic wealth difference of Caucasian middle-income families, relative to African-American and Latino families. These income and wealth differences make it difficult for African-American and Latino families to afford adoption, despite a significant percentage of non-Caucasian children in need of adoption. AdoptHelp, Inc., a national adoption agency, shared that approximately 40 percent of the children they place for adoption are non-Caucasian, while only approximately 20 percent of their adoptive parents are non-Caucasian. Racial diversity is wonderful in many ways (speaking as a Caucasian mother of two beautiful African-American children), but it can also be difficult on a child’s identity and emotional wellbeing, for which there is no price-tag. 
  • Parental Age: Beyond racial divides, there’s also the consideration of parental age. Adoptive parent ages already exceed new-parent averages, with many adoptive parents in their 40s and 50s. The loss of the adoption tax credit would require even more years of savings, which could naturally translate into an even older adoptive parent pool. While there are many capable, able, and loving older parents, age demographics related to child-raising needs is an important consideration.
  • Foster Care Impacts: Finally, foster care impacts are perhaps the most important consideration. If we abolish the adoption tax credit and make adoption too expensive for most American families, we potentially increase the number of children placed into foster care. While some foster care experiences can be nurturing, studies show that children placed in foster care present higher rates of physical, developmental, and mental health problems.

The adoption tax credit might only affect a sliver of the population, but its true impacts are much more far-reaching. They affect everyone, particularly the precious children awaiting loving, nurturing, homes. As a financial advisor and mother of two adopted children, I hope that all of these factors are carefully considered before the adoption tax credit is contemplated in future tax measures.

Jennifer Myers is the owner and president of SageVest Wealth Management and SageVestKids, and proud adoptive mother of two young children.