Friday, January 25, 2013

Interest Free Loans & the Adoption Tax Credit

I don't usually encourage families to go into debt for adoption. I think that God will provide the funds if He wants a family to adopt. However, one idea for financing adoption expenses caught my eye - interest fee adoption loans!

Interest free adoption loans could be repaid with the money received from adoption tax credit. Families can get interest free adoption loans from several organizations. After their adoption is finalized they can apply for the adoption tax credit (a little over $12,970 per child). Each year, when they receive their tax refund check, they can use that money to pay off a portion of the loan! (Most families won't receive the total amount in the first year. They can carry the remaining credit forward for up to five additional years.)

There may be other places to get interest free adoption loans but here are a few that I know about -

  • The Abba Fund - Interest free loans to Christian families.

  • Lifesong Legacy Fund - The Lifesong Legacy Fund offers Interest Free Loans to help Christian families overcome the high cost of adoption. For donors, the Legacy Fund is a gift that keeps on giving. As the loans are repaid, new family needs are met…creating a self-perpetuating fund. Families enter into a covenant agreement to repay the loan through manageable monthly or annual payments.

  • Hebrew Free Loan -  Interest free adoption loans up to $15,000 for Jewish families.


  1. With the adoption credit no longer being refundable, this is not really an option, unfortunately, because most families will get nothing back to repay the loan with.

    1. Even thought the tax credit is not "refundable" in that families receive a check for the whole $12,970 per child, families may still receive a refund check back from the tax credit. Since the tax credit can be carried forward over a period of years, every year they can use the refund money to help pay off the expense!

      Save the Adoption Tax Credit explains it this way: (

      "What does it mean that the credit is not refundable?

      "A non-refundable credit is one in which taxpayers receive a refund of federal income taxes, but only up to the amount of taxes they otherwise had due. In one year, taxpayers can use as much of the adoption tax credit as the full amount of their federal income tax liability, which is the amount on line 46 of the Form 1040 less certain other credits (such as the Child Tax Credit). Even those who normally get a refund may still have tax liability; with the adoption tax credit the taxpayer could get a larger refund.

      "Families who have lower or moderate incomes typically have no tax liability and will not benefit from a non-refundable credit. We still encourage families who don’t think they have a tax liability to file for the credit (Form 8839), in case families’ tax liabilities change in future years.

      "Here’s a very simplified example: A family has $5,000 in federal income taxes withheld from their paychecks during the year. When they do their taxes, they look at the tax tables and based on their adjusted gross income, their federal income taxes are $1,000 (this is their tax liability). If there were no adoption credit, they would be due a refund of $4,000. The family had qualified adoption expenses of $8,000. Because of the adoption credit, they would receive an additional $1,000 refund for that tax year (reducing their tax liability to zero), meaning that they get the full $5,000 that was withheld back rather than just the $4,000 they would have gotten without the non-refundable credit.

      "They can carry the remaining $7,000 ($8,000 in expenses minus the $1,000 they received) forward to future years and receive additional refunds depending on their tax liability in future years."

  2. We are in that 'no tax liability' group, lol :) We are still going to apply just in case things change in the future.

    I have loved all your informative posts and will be referring back to them for our next adoption.

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