Guest Post: “What You Should Know About the Federal Adoption Tax Credit”

Kelly Ellison, adoptive mom and founder of Your Adoption Finance Coach, shares some key takeaways from her recent webinar on the Federal Adoption Tax Credit.

WACAP is committed to building strong families; partnering with Your Adoption Finance Coach, we offer adopting families coaching support and resources to help them become financially prepared for their adoption, and as a result, even more equipped to focus on the child waiting to be welcomed home.


Call it the eighth wonder of the adoption world, the Adoption Tax Credit has helped thousands of adoptive families recoup the costs of their adoption. Recently, we hosted a live webinar with Adoption Tax Credit expert Becky Wilmoth, who enlightened over 90 families on several important details about the tax credit.

Below is a list of takeaways that many of us heard for the first time:

Employer Reimbursement Programs can vary and have two different tax implications.

Reimbursements: While reimbursements are great, we have to watch out for whether or not these are considered taxable. Your human resources staff should know how they will disburse the funds and typically, it is after the fact and based on receipts/expenses. It will likely appear on your W-2 and if it’s taxed will have a code T next to the amount reimbursed.

Qualified Adoption Assistance Program: This is the best benefit if you are fortunate enough to have a company that offers it. Not to take away from the reimbursement benefit – (kudos to all who offer reimbursement support!) – but the qualified programs are extra-special and here’s why:

  • First, the company takes the steps to create this program with the IRS.
  • As a benefit of this action, they can allow the employee to withhold $13,470 (amount of the tax credit) from taxable income AND the employee can also take the adoption tax credit on their own taxes.
  • The only catch is that they cannot use the same expenses.

Creating the Best Plan

The bottom line, remember this important factor when considering adoption: While there is no silver-bullet, no one ‘thing’ that is going to cover the cost of all of your adoption fees and related costs, there are many ways to develop a plan for how you’ll come up with all the funds you’ll need to help bring your family together.

Some excellent resources are listed at the base of this article for how you can learn more about this credit.

Reasons to Advocate

Oh, and by the way, advocate, advocate, advocate. Even though the tax credit was made permanent as a result of past advocacy efforts, the credit still needs to be refundable. (When a credit is not refundable” families can receive back only as much as they have in federal income tax liability.)

Reach out to your senators and representative to let them know how important changing the Federal Adoption Tax Credit to a refund is to the future of so many families.

As an adoptive family, or as someone connected to the adoption community, you can make a difference by being an advocate for adoption. A way to do this, in addition to advocating for the tax credit’s becoming refundable, is to approach your employer and see if they have an adoption benefit. If they don’t, maybe you can volunteer to help them create one. It’s possible that other employees have gone through exactly what you may be experiencing, but didn’t ask.

A great resource for how to create an adoption-friendly workplace is the Dave Thomas Foundation. This website has a complete adoption-friendly kit that can be downloaded and shared with the right folks.

As always we recommend that you check with your accountant or CPA to verify the information provided in this article. We are NOT accountants or CPA’s and this information is not to be considered tax advice.

Below are some resources that you may find helpful:


adoption-finance-coach-wacap1About Your Adoption Finance Coach:
Your Adoption Finance Coach offers online resources, training and one-on-one coaching helping adoptive families create and implement a financial plan for completing their adoptions. Founder/CEO Kelly Ellison is also an adoptive parent, and understands the complexities of planning for an adoption and navigating the process. She holds an M.A. in Business Administration and has over 25-years of experience in nonprofit leadership, marketing and fund-development. An experienced speaker, facilitator and executive coach, Kelly brings her background and adoption expertise to over 1,200 families and professionals from over 30 adoption agencies across the U.S.


WACAP (World Association for Children and Parents) is one of the largest and most experienced international nonprofit adoption and child assistance agencies in the United States. Since 1976, we’ve placed over 10,000 children with loving adoptive parents and provided food, medical care and education to more than 200,000 children around the world.
This entry was posted in Adoption, Adoption FAQ, Call to Action, Collaboration, Domestic Adoption, International Adoption, Support Services and tagged , , , , , , , , , , . Bookmark the permalink.

2 Responses to Guest Post: “What You Should Know About the Federal Adoption Tax Credit”

  1. For most people the adoption tax credit is completely useless since as you mentioned you have to have federal tax liability… People who would most benefit from this adoption tax credit do not because you usually only have tax liability when you have a higher income. And of course the irony is if you have a higher income you’re often not eligible for it anyways because of your income. I absolutely agree that the adoption tax credit should be changed into a refund so that everybody can take advantage of it.

  2. WACAP says:

    Thanks for sharing your thoughts. We shared your comment with Your Adoption Finance Coach Founder and CEO Kelly Ellison, author of the post, and below is her response. – WACAP

    Thank you for your response.

    Every tax situation is different. However, in our experience at Your Adoption Finance Coach, we have found that more people actually do benefit from the adoption tax credit than do not. Most people who make a median income do benefit the most from the tax credit, where those making $201,920 – $241,920.00 per year actually ‘phase-out’ of receiving the full tax credit benefit. (see IRS.GOV) We do see a percentage of families who are employed as pastors or in the military where they have a low or no withholding, and in this case the tax credit is not as beneficial. However, if someone is active military, they receive a $2,000 per child reimbursement for a completed adoption and in the case of pastors, some religious organizations give grants to their pastors for adoption.

    It’s true more people would benefit if the credit becomes refundable; it’s also likely that there would be the same kind of income restrictions phasing out the refund for those with incomes above a certain level, like there are with the credit.

    You may be interested in the fact that it was just introduced again by Senators Blunt (M0) and Casey (PA) to make the adoption tax credit refundable. Here’s the link: Adoption Tax Credit — Make it Refundable — https:/

    This initiative could raise all boats! Thanks for reading!

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