The Federal Adoption Tax Credit and Adoptions from Foster Care, by Oberlin Assistant Professor of Economics Maggie Brehm.
The federal adoption tax credit is the single largest credit available to individual filers, with a maximum value of about $13,000. This paper investigates how responsive the number and timing of foster care adoptions are to the Federal Adoption Tax Credit using two changes to the credit: when it was made refundable in 2010, and when it reverted to a nonrefundable credit in 2012.
I find the effect of the refundable credit is concentrated around when it was set to expire at the end of 2011. Using a bunching analysis, I estimate that about 2,700 more foster care adoptions, or about 50 percent more adoptions, occurred nationwide in December 2011 than might have been expected otherwise.
Of this increase, I estimate an upper bound on the number of new adoptions of about 1,500, or about 55 percent of the increase; the remaining 45 percent are adoptions that were accelerated by about two months. Assuming all of the increase comprises re-timed adoptions, however, I estimate a pull-forward window of about three to six months.
Prof. Brehm conducts research in the fields of labor economics, public economics, and economics of education. Her current research in child welfare and public policy examines the extent to which federal spending affects foster care placement and adoption from foster care.
She teaches courses in principles of economics, poverty and inequality, and econometrics.
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