New Provisions: Adoption, 401K, IRA
The SECURE Act has introduced a new provision that allows the adoptive parent(s) to each draw $5,000 out of their 401k or IRA for adoption-related expenses. This new provision came into effect this year and is a welcome relief for many parents who are planning to adopt.
Adopting a child can be an expensive process, and many adoptive parents struggle to produce the necessary funds. The new provision in the SECURE Act makes it easier for adoptive parents to access funds for adoption expenses without facing the usual penalties for early withdrawals from retirement accounts.
Additionally, if you adopt a child out of foster care in Georgia, you may be eligible for the Georgia Adoption Tax Credit. This credit is $6,000 per child per year for the next four years, plus a child adopted from foster care gets free college tuition at any college or technical school within the State of Georgia. After four years, the tax credit goes back down to $2,000 per child per year.
It’s important to note that the Federal Adoption Tax Credit is also available for those who qualify. The credit is currently $15,950 per child for the year 2023. The credit helps offset the cost of adoption for those who meet the income requirements.
However, it’s always best to consult a tax professional before making any withdrawals or claiming tax credits. They can provide advice on eligibility requirements and ensure that you are taking advantage of all the available tax benefits.
In conclusion, the new provision in the SECURE Act, combined with the Georgia Adoption Tax Credit and the Federal Adoption Tax Credit, can make a significant difference in making adoption more affordable. By taking advantage of these resources, adoptive parents can focus on providing a loving home for their child, rather than worrying about the financial burden of the adoption process.