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Adopting a child can be expensive but a federal tax credit and state and federal adoption assistance programs can help. You may have other options as well.
Here’s a look at the costs of adoption and the various forms of financial assistance that may be available to you.
Key Takeaways
- Adopting a child can cost anywhere from $0 to $50,000 or more depending on the type of adoption.
- Both the U.S. federal government and states have programs that can help defray the costs of adoption.
- Grants and loans are also available from some private foundations and organizations.
- Borrowing from a retirement plan or taking out a home equity loan can be other sources of funds.
What Does Adoption Cost?
Adoption costs in the U.S. vary widely.
Adopting a child who is in government-sponsored foster care may cost a few thousand dollars. The cost of adopting through a private agency can reach up to $60,000. Independent agencies outside the public child welfare system typically cost from $25,000 to $45,000. Adopting a child from another country can run between $20,000 and $50,000 on average.
$322,427.12
The estimated average cost of raising a child born in 2024 to age 18, as calculated by Investopedia from 2015 U.S. Department of Agriculture data and adjusted for inflation.
What Resources Are Available to Help Pay for Adoption?
Money to help defray the cost of adoption is available from both governmental and private-sector sources.
Federal and State Adoption Assistance for Children in Foster Care
The federal government and state governments offer adoption subsidies for children adopted from foster care. The child must meet certain criteria to be eligible and the provisions can vary from state to state.
“The term ‘eligible’ most frequently refers to children who are school-aged, part of a sibling group, children of color, or those with specific physical, emotional, or developmental needs,” according to the Children’s Bureau which is part of the U.S. Department of Health and Human Services (HHS). Assistance can include “monthly cash payments, medical assistance, social services, and nonrecurring adoption expenses.”
More information on these benefits and how to apply for them is available as part of HHS’s Child Welfare Information Gateway.
Federal Tax Credits for Adoption
The federal government provides a tax credit to adoptive parents. An eligible adoptee must be “under the age of 18 or […] physically or mentally incapable of self-care,” according to the Internal Revenue Service (IRS). Adopting the child of the taxpayer’s spouse doesn’t qualify.
Eligible expenses include:
- Reasonable and necessary adoption fees
- Court costs and attorney fees
- Travel expenses
- Other directly related expenses
The adoption tax credit depends on your income. For the 2025 tax year, it begins to phase out if your modified adjusted gross income (MAGI) is $259,190 or higher and phases out entirely at $299,190. The total amount you can claim per child (so you can claim it more than once in the same tax year if you adopt multiple children) is $17,280 per child.
The credit is partially refundable up to $5,000 (indexed for inflation) even if you don’t owe any taxes. The provision was set in place under President Donald Trump’s One Big Beautiful Bill. It applies to domestic, private, foster care-related, or foreign adoptions finalized in tax years 2025 and later.
To qualify for the adoption credit, the child:
- Is under 18
- Has a disability or is physically or mentally unable to care for themselves
- Is determined to have special needs
Some states also offer adoption-related tax credits.
Tip
A tax credit is better than a tax deduction because it reduces the taxes you owe dollar for dollar. A tax deduction simply reduces the amount of income on which you pay taxes.
Grants and Loans for Adoption
Private foundations and other organizations offer grants and loans to adoptive parents in addition to governmental aid. HHS lists some of them as part of its Child Welfare Information Gateway.
Employer-Sponsored Adoption Benefits
Your employer might be another source of help. A growing percentage of companies offer adoption assistance programs. These programs may not only provide financial assistance but also other benefits, such as parental leave.
Employer financial assistance may take the form of a lump-sum payment or reimbursement for expenses up to a certain maximum. Those benefits can range from as much as a $1,000 reimbursement for the completion of a home study or a maximum of $3,000 reimbursement for the placement of a child in a home, according to the Dave Thomas Foundation for Adoption.
As a bonus, employer-provided adoption assistance is excludable from the employee’s taxable income up to the same limit as the federal tax credit: $17,280 in 2025. The exclusion also phases out over the same income range from $259,190 to $299,190 in 2025.
Important
You can claim both the tax credit and the income exclusion in the same year and for the same adoption but you can’t apply the same expenses to each tax break. That would be double-dipping.
An employee could claim an adoption tax credit for $17,280 in 2025 and also exclude another $17,280 in employer assistance from their taxable income in 2025, but only if their total adoption expenses were enough to cover both tax breaks: $17,280 + $17,280 = $34,560. They would have to have at least $34,560 in total adoption expenses to claim both.
They would be able to exclude only $17,280 from their income if their employer gave them $17,500 because excluding the entire $17,500 would put their total tax break at $35,000, more than the combined respective limits.
Tapping Your Retirement Accounts
Your retirement accounts could also be a source of funds if you participate in a 401(k) plan at work or have an individual retirement account (IRA) on your own. Any withdrawals you make before you reach age 59½ would normally be subject to a 10% early withdrawal penalty on top of the income tax you owe. Adoption is an exception to penalty, however, since the passage of the SECURE Act in 2019 in 2019.
Individuals can take a penalty-free distribution of up to $5,000 to pay for adoption expenses “during the 1-year period beginning on the date on which the child of the individual is born or on which the legal adoption by the individual of an eligible adoptee is finalized.”
The law also specifies that the adoptee must be an eligible adoptee which the IRS defines as “any individual (other than a child of the taxpayer’s spouse) who has not attained age 18 or is physically or mentally incapable of self-support.”
A married couple could take distributions totaling $10,000 under these rules.
Home Equity Loans and Lines of Credit (HELOCs)
You can take out a home equity loan or home equity line of credit (HELOC) for any purpose you wish, including adoption, as long as you have sufficient home equity and meet the lender’s other financial requirements. A personal loan from a bank or other lender could be another option but they tend to have significantly higher interest rates.
What Does It Cost to Adopt a Child in Foster Care?
Families Rising (formerly the North American Council on Adoptable Children) estimates the cost at between $0 and $2,500.
Are Adoptive Parents Entitled to Paid Parental Leave?
Not at the national level but adoptive parents can be eligible for 12 weeks of unpaid parental or family leave within the first year of placement under the federal Family and Medical Leave Act of 1993. They must have worked for that employer for at least 12 months to qualify and the employer must have at least 50 employees.
The U.S. has no national policy providing for paid leave for adoptive or other parents but such leave is available or scheduled to go into effect in 13 states and the District of Columbia. Eleven states and the District of Columbia offer 12 weeks of paid leave. Some employers also have their own voluntary paid leave programs.
Can You Put an Adopted Child on Your Employer’s Health Insurance Plan?
Yes. According to the U.S. Department of Labor’s Employee Benefits Security Administration, “Birth and adoption (including placement for adoption) may trigger a special enrollment period during which you, your spouse, and your dependents can enroll in your employer’s plan or in a plan offered through the Health Insurance Marketplace. To request special enrollment in an employer plan, you must notify your plan within 30 days of your child’s birth, adoption, or placement for adoption. If you choose to enroll in Marketplace coverage, you must do so within 60 days of the birth, adoption, or placement for adoption.”
The Bottom Line
You can pay for adoption in many ways from taking advantage of government programs to private and employer-based ones. You can also borrow money if necessary, including from your retirement plans. You’ll qualify for child tax benefits as well when you’re a parent.
