Adoption Assistance

If you adopt a child, an FSA can reimburse up to $13,840 of adoption expenses in 2018.

You can only take the reimbursement once per child. So, if the adoption process spans several years, you need to consider which year is best (tax-wise) for taking the reimbursement.

This benefit is gradually phased-out based on your income level.

You may also benefit by using the adoption assistance as a tax credit on your IRS Form 1040. The 2018 limit of $13,840 is the same as if the reimbursement is filed through your FSA.

However, if you fall in the 27% tax bracket or higher, paying for adoption expenses through the FSA will probably save you more money than taking the tax credit.

In 2018, if you have more than $13,840 in qualifying adoption assistance expenses you may be able to be reimbursed up to the FSA dollar limit established by your employer’s Cafeteria Plan and utilize the tax credit for additional qualified adoption expenses you have incurred.