As you prepare to bring a child into your family through adoption, you might have many questions about the financial assistance available for adoptive families. Financial assistance for adoption can come from government agencies or individual organizations.
There are several types of assistance available including:
Adoption Tax Credit
In the United States, each year parents who adopt a child may be entitled to claim a tax credit on their federal income taxes for certain expenses related to adopting a child. The maximum amount will depend on the age and legal status (domestic/international) of the adopted child. For example:
-The maximum amount allowed per child is $13,460 if the child is under 18 years old and classified as domestic;
-The maximum amount allowed for a tax credit is $13,460 if the child is under 18 years old and classified as international;
-The maximum amount allowed per child is $10,970 if the child is at least 18 years old and classified as domestic;
-The maximum amount allowed for a tax credit is $10,970 if the child adopted internationally is at least 18 years old.
A gift of money given by one individual that goes towards the cost of the adoption. Adoption Grants can be given to both domestic and international adoptions no matter the age of the child. You should take advantage of the Adoption Grant program even if you have been turned down by another agency.
Keep in mind that adoption Grants are not tax credits and will not affect your chances of taking a tax credit for adoption.
Home Equity Loans
In some cases, a bank or a credit union may consider taking a second mortgage on your home as an adoption loan. The interest rate on the loan will be significantly lower than for a typical first-time homebuyer so it can be a viable option for those looking to adopt a child.
For example, a typical home equity loan might carry an interest rate of 7-8% and provide for a maximum amount of $300,000. If you were to take out this type of loan at the traditional rates you could expect an annual percentage rate (APR) in the neighborhood of 9%. It is likely that your credit score would have to be excellent in order to get approved for such a large amount.
If you wanted to avoid high fees by going with the least expensive company possible then you might find an online bank offering rates on home equity loans as low as 5%. As long as your credit score is good enough for the institution to give you the loan there are no application or origination fees involved either.
Personal Loan For Adopting A Child
There are banks and institutions that would offer you a personal loan to help pay for adoption costs. You could go with the cheapest companies out there by choosing an online bank offering rates as low as 5%. Your credit score would also need to be high enough (and you would need good employment history) for this type of institution to give you the loan without any risk involved.
Adoption loans typically require that your credit score is over 680 and that you have at least 2 years of steady income.
These three options are viable ways to get financial assistance for adoption costs. Whether it is a personal loan or a grant or even utilizing a tax credit be sure to explore each option, understand their benefits so that you can make an informed decision.