In 1997, Congress implemented an adoption tax credit to encourage the adoption of children who otherwise might not grow up in families. The adoption tax credit has been very successful, helping make possible the adoptions of thousands of children. And studies suggest the federal government receives up to a nearly 10-to-1 return on its investment through this tax credit — a good investment by any standard.
House Republicans, however, recently released their tax reform plan, and, like other tax credits and deductions, the tax reform plan proposes to eliminate the adoption tax credit. This is a huge mistake.
As any adoptive parent can tell you, adopting a child can be costly. An Adoptive Families Magazine survey of 1,100 families who adopted children from 2012 to 2013 found that, on average, families spent $34,093 on independent adoptions and $39,966 if they went through an agency. These costs have continued to increase as adoptions have come under increasing regulation.
The adoption tax credit helps low- and moderate-income families to be able to afford the high costs of adoptions. The credit in 2017 provides families with a maximum deduction of $13,570 for adoption-related expenses. This credit begins phasing out for higher-income households earning $203,540 and is eventually phased out for families earning $243,540 or more. If a family cannot use the entire credit in one year, it can be carried over for up to five years.
The claim has been made that the adoption tax credit has not increased the number of adoptions. I believe this assertion is faulty, but one thing I do know for sure is that the adoption tax credit has helped thousands of couples who want to be parents establish a forever family. I recall sitting with a couple who wanted to adopt. Both were teachers, and the most they could afford for their adoption budget was less than $15,000. But when I explained how the adoption tax credit worked, suddenly their adoption budget increased to over $25,000, and they were able to afford the costs of adoption. They went on to adopt four children.
Many other couples I’ve worked with over the last 20 years have found similar help from the adoption tax credit.
Importantly, the adoption tax credit is also good fiscal policy for the federal government. Studies indicate the federal government saves up to about $127,000 for each child adopted. These savings are from avoided foster-care costs and other very real social costs incurred if a child available for adoption is not adopted.
Many members of Congress argue that the current Republican tax reform proposal will put money back in Americans’ pockets. But, even with the proposed increased standard deduction and the child tax credit, it will take some families years to save the amount of money equivalent to the adoption tax credit.
The adoption tax credit must be saved. As chair of the Senate Finance Committee, Sen. Hatch can save the adoption tax credit by insisting it is retained in any tax reform. Utah's children need this.
Larry S. Jenkins is a Salt Lake City attorney who has practiced for over 30 years, and adoption law for over 25 of those years.