Taxes and Adoptions from Foster Care: Evidence from The Federal Adoption Tax Credit

Abstract

This paper uses administrative data on the universe of public adoptions to investigate whether the federal Adoption Tax Credit influences adoptions from foster care. Using a bunching analysis, I exploit a two-year change in 2010 and 2011 that made the credit refundable. I estimate there were about 2,400 more foster care adoptions, a 44 percent increase, nationwide in December 2011 than had the refundable credit not expired. Of this increase, I estimate an upper bound on the number of new adoptions of 1,790. Assuming all of the increase reflects re-timing, I estimate a pull-forward window of up to six months.