Financial Intel Monthly

Adoption Assistance Opportunities for Your Employees

Jul 18, 2020 9:35:00 AM / by The Retirement Group

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What Is It?

In General

The high cost of adoption deters many couples from the adoption process. Federal law provides you with the opportunity to assist employees who would like to adopt but are unable to for financial reasons. The law accomplishes this by allowing you to implement an adoption assistance program that provides your employees with the financial resources they may need to adopt while furnishing you with a tax deduction.

Adoption Assistance Programs

If you choose to implement an adoption assistance program, the IRS allows you to deduct the cost of the program. Furthermore, for tax year 2018, you are permitted to exclude from your employee's gross income up to $13,810 of adoption assistance that you provide to your employee through the program ($14,080 in 2019).

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Tip: Employees may also qualify for a tax credit for qualified adoption expenses of up to $13,810 per eligible child in 2018 ($14,080 in 2019). An employee may qualify for this credit even if employer-provided adoption assistance is excluded from income. However, the exclusion and the credit may not be taken for the same expenses (but they may be taken for the same adoption).

Caution: If you implement an adoption assistance program, you should be aware of Employee Retirement Income Security Act (ERISA), Consolidated Omnibus Budget Reconciliation Act (COBRA), and Family and Medical Leave Act (FMLA) requirements regarding adoption.

Tip: The law provides for a phaseout of the adoption assistance exclusion amount that begins when the taxpayer's adjusted gross income (AGI) in 2018 reaches $207,140 ($211,160 in 2019). This income exclusion benefit is completely phased out when the taxpayer's AGI reaches $247,140 ($251,160 in 2019).

IRS Guidelines

The IRS requires that your adoption assistance program meet the following guidelines before you can qualify for the tax deduction:

  • The program should be in writing and should not discriminate in favor of highly compensated employees
  • You cannot pay more than 5% of the program's benefits to shareholders or owners owning 5% or more of the stock, capital, or profits of the company
  • Notification must be given to employees as to the availability of the plan
  • Employees provide reasonable substantiation that payments or reimbursements are for qualifying expenses



This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.


The Retirement Group is not affiliated with nor endorsed by,,,,, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.


The Retirement Group is a Registered Investment Advisor not affiliated with FSC Securities and may be reached at


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