Welcoming an adopted child into your family is a wonderful event. Be it a newborn relinquished by a mother unable to raise the child or a foster-care youngster yearning to find love and comfort in a permanent home with new parents, adoption can be both fulfilling and challenging at the same time.

Nearly 135,000 children are adopted each year in the United States. At the same time, figures show over 423,000 children remain in the U.S. foster care system. Of those, nearly 115,000 are available for adoption but remain waiting. This number grows larger each year.

One reason the adoption rate isn’t higher in the United States is the high costs associated with being a parent.

Let’s face it. Raising kids is expensive.

According to figures released by the U.S. Department of Agriculture in 2013, it could cost middle-income parents just over $245,000 to raise a child to the age of 18. Add a four year college education at nearly $200,000 and the number is nearly overwhelming.

There are no statistics to refer to, but there must be a number of potential adopting parents who analyze those costs and eventually decide not to adopt because of the staggering costs of raising a child.

That’s the bad news. The good news is that there are many financial benefits and programs available to help parents offset many of those expenses and make welcoming a new family member a joyful event rather than a burdensome expense.

Income Tax Deduction

The first and most immediate savings will show up when you prepare your first income tax return after you’ve officially adopted a child. You’ve just added an exemption that reduces your taxable income ($4,000 for 2015 tax year) for each year you can claim the child as a dependent.

Adoption Tax Credit

This is a tax credit that is offered to adoptive parents to encourage adoptions in our country. Section 36C of the United States Internal Revenue Code states that the credit is for qualified adoption expenses that are paid for by individual taxpayers. In essence, the federal government is reimbursing you for your expenses of adopting a child under 18 in the form of a tax credit. These expenses include:

• Court costs
• Lawyer fees
• Travel expenses
• Meals and Lodging
• Adoption fees and other expenses

Although this income tax credit provides a significant savings benefit to the parents, the government also made it one of the most complicated deductions for the average tax-payer to understand. Consulting an income tax professional for assistance the year you are eligible for the credit is recommended.

For taxable years beginning in 2015, under § 23(a)(3) the credit allowed for an adoption of a child with special needs is $13,400. For taxable years beginning in 2015, under § 23(b)(1) the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,400. The available adoption credit begins to phase out under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $201,010 and is completely phased out for taxpayers with modified adjusted gross income of $241,010 or more. (See sections 3.18 and 3.19 of this revenue procedure for the adjusted items relating to adoption assistance programs.)

And remember, a tax credit is not a tax deduction. A deduction lowers the taxable income that you pay taxes on. A credit is deducted in full from the tax owed, a significant savings. The actual credit amount is computed and based on the amount of adoption expenses incurred to complete the adoption — the more that is spent, the higher the amount of the tax credit.

This adoption tax credit is available for adopted children under the age of 18 and who are not a step-child of you or your spouse.

State Programs

The income tax deduction for dependents applies to state income taxes as well as federal. Most states also have adoption assistance programs to help ease the financial burden of adoption.

Arizona, for instance, offers adoption assistance and subsidy to “special needs” adoptees who meet certain requirements of eligibility. The maximum adoption assistance maintenance payment in Arizona is currently $590 for children ages 0-11 and $651 for ages 12-20. This program is aimed at easing the extra financial burden a “special needs” child places on a family above and beyond the costs of raising a normal child.

Employer Assistance

Many private companies have seen the value of adoption and have established programs that help employees pay for costs incurred during the adoption process. These adoption benefits are usually similar to benefits available to new biological parents. They included information resources, financial assistance and parental leave.