Impact of a Policy: The Adoption Tax Credit Supports Families

What do you think of when you hear that over 100,000 children are waiting in the American foster care system to be adopted – a figure that doesn’t include the 20,000 infants placed for adoption at birth in the U.S. each year?

Like other social quandaries, the plight of children in need of a home can feel too big to tackle systemically. Often, we focus on impacting individuals in direct and tangible ways. Some people might pray for and seek to support relevant ministries or families in church. Others donate to or work in institutions like adoption agencies. A very special group of people sets out on the journey of adoption for themselves.

These kinds of direct actions are the bedrock of a healthy community. Any efforts to alleviate a problem in society must start at home. For many of us, however, it’s too exhausting to imagine large-scale change. Government is too divided, policies are too complex, and unintended consequences are too frequent.

While many of us do not work directly in politics and may make a bigger difference locally through churches and personal ministries, we must not, either as individuals or as a society, devalue the significance of choices made at the legislative level. Public policies can and do have a significant impact on our lives and the lives of our neighbors. 

For example: five pages in the Internal Revenue Code that make it possible for countless children to be adopted each year.

Influencing Adoption Through Tax Policy

The Adoption Tax Credit (ATC) was included in the Small Business Job Protection Act of 1996 and was made permanent in 2013. However, it was almost eliminated from House Republicans’ recently passed tax plan, the Tax Cuts and Jobs Act. Opposition to the ATC’s omission was swift and bipartisan, even uniting pro-life groups and advocates for same-sex families. Christian thought leaders advocated vigorously for the ATC. Russell Moore, president of the Southern Baptist Convention’s Ethics and Religious Liberty Commission, called the omission “shameful” and “insane,” hurting children and adoptive families. Michael Wear , author of Reclaiming Hope: Lessons Learned in the Obama White House About the Future of Faith in America, and David French, a senior writer for The National Review, also condemned the decision.

Although it was eventually added back into the bill, the fact that the Adoption Tax Credit came so close to being eliminated makes this an especially important time to consider its significance.

Unless you’ve seriously considered adoption, you may not know much about the ATC. At first glance, it may sound like just another tax break – beneficial, but nothing that would make a huge difference for an individual.

In fact, it might be best to think of the ATC like a government subsidy. That’s because for every child a family seeks to adopt – whether the adoption is completed or not – the family will receive back up to $13,570 (adjusted for inflation) of adoption-related expenses. If you are willing to pursue adoption, the government will help cover your costs.

A tax credit is the most direct way to accomplish this. Tax credits are dollar-for-dollar reductions of what a person owes in income taxes. For example, a $1,000 tax credit would save a person $1,000 in taxes.

Because the size of a tax credit is determined by the amount of income tax a person is responsible for, some people might receive the full $13,570 per child all in one year. Others may never receive the full amount. There are two reasons for this. One is that the credit is currently non-refundable. Someone whose adoption-related expenses are higher than their tax obligation won’t receive a check from the government to make up the difference. The Affordable Care Act did make the ATC temporarily refundable in 2010 and 2011, but that changed when claims under the ATC nearly quadrupled in amount and anti-fraud precautions led to a dramatic increase in audits of families seeking to adopt.

On the other hand, families that make over $200,000 are also limited (while earning more than $243,540 currently disqualifies individuals altogether). It is important to remember that the ATC is primarily about adoption, not taxes. Since money is a limited resource, it ought to be used in a way likely to lead to the most adoptions. People with lots of income may not need assistance to adopt, while many others wouldn’t pursue adoption without it.

Christians in particular should be the biggest champions of adoption in the world, both because of who we are and who God is.

As an additional benefit, potential parents remain eligible for the credit for six full years. Let’s say a parent spends $10,000 in adoption expenses for a child in 2014 but only receives $1,000 from the ATC because they owed little in taxes. In each of the next five years, the parent could continue to use the ATC to reimburse their 2014 adoption expenses. If their tax obligation remains the same, they would keep receiving $1,000. If they reach a higher tax bracket, they could receive a higher amount.

Does the Adoption Tax Credit Really Make the Difference for Families?

By most estimates, adoptions through an agency cost no less than $20,000 – and often as much as $40,000 or more.

Besides extensive agency fees, prospective parents may owe legal fees and incur travel expenses. Additionally, they may need to make pricey property improvements to ensure the child’s new home fits within state regulations. Unlike the upfront (and similarly priced) expenses of college tuition or car ownership, there is no equivalent to student or auto loans for adoption.

Through the Adoption Tax Credit, however, families earning between $75,000 - $200,000 can usually receive between $5,000 - $8,000 in one year alone. Compare that with the Child Tax Credit, which maxes out at $1,000 per year per child, and the potential impact of the ATC becomes clearer.

Additionally, there is a common misconception that the ATC does not apply to adoptions through the foster care system. In fact, many people who adopt through the foster care system receive the most assistance through the ATC. Approximately 90% of foster care adoptions qualify as “special needs adoptions” – a state determination that the child is especially vulnerable. These are children who cannot return to the home of a parent and are more difficult to match with an adoptive family – whether because of age, health, or sibling attachments. Parents who pursue these kinds of adoptions are eligible for all $13,570 per child, regardless of whether they spend that much. Due to the fact that foster care adoptions do not involve private agencies and are considerably cheaper, the ATC’s resources can provide huge incentives to pursue these kinds of adoption.

And What Does the Lord Require of You?

From a standpoint of public justice – and Christian obedience – the ATC matters in a few ways.

Family is the most focused and formative kind of community in society. The health of familial communities inevitably predicts the health of a national community. Healthy families provide structure for children, teaching future employees and citizens about responsibility and commitment. They protect children, advocating for their health and education. Government cannot do these things, but it can encourage and strengthen them through pro-family policies.

While the relative stability of family life is essential to all children’s well-being and development, it is especially crucial for children who spend time in foster care. These children are twice as likely to have learning or developmental disabilities, three times as likely to have ADHD or other sensory problems, and seven times as likely to grapple with depression (among other risks).

Christians in particular should be the biggest champions of adoption in the world, both because of who we are and who God is.  

We were once lost ourselves. Though we wished for mercy during times of guilt, we could not find it. Though we wanted the love and purpose that comes with belonging, we had only ourselves. We were orphaned and alone. But in the absence of mercy, God said to us “I will have mercy.” Though we were not his people, God said “You are my people” (Hosea 2:23). Our adoption into the family of God the Father, God the Son, and God the Holy Comforter makes every difference for us. How can we not feel desperate to imitate that same love?

Our status as children of God flows from the very nature of our just and loving God. He is Defender of the vulnerable, punishing Old Testament nations for their mistreatment of widows and orphans. He is “Father to the fatherless” and “sets the lonely in families” (Psalm 68:5-6). These are not merely spiritual analogies; our need for spiritual adoption is mirrored and enriched by our longings for physical families. We are created for both by the Triune God, in whose image family originates.

By some estimates, nearly 4 in 10 Americans have considered adoption at some point. Through prayers, resources, and even policies, we need to be a country that makes it easier for them to take the leap, knowing that they will be cushioned by a community that supports them and their growing families.

-Philip Kline graduated from Wheaton College in 2017. He lives in Northern New Jersey and works in public relations.