Photo by Kindel Media
The tax reform provisions in the One Big Beautiful Bill Act enhanced financial help for families who choose to grow by adopting. It made up to $5,000 of the adoption tax credit refundable. The change was made effective for the 2025 tax year. But it was unclear what that meant for prior, nonrefundable excess adoption credit amounts that were carried forward. The IRS has now cleared up the credit confusion, and is automatically sending 50,000+ affected adoptive parents credit-related refunds.
Tax law changes typically are a challenge for taxpayers (and their tax pros) who must deal with the real-file revisions.
Sometimes it costs filers. Other times, new Internal Revenue Code provisions help them. And in either situation, there’s usually confusion and frustration.
That was the case this filing season for families that grew by adopting children. But their adoption tax credit filing hassles are finally being rewarded with refunds created under the One Big Beautiful Bill Act (OBBBA).
New adoption credit bonus: The adoption tax credit already was valuable since, as a credit worth up to $17,208 in 2025, it can help reduce eligible filers’ tax liability dollar-for-dollar.
The OBBBA made it even better. Now, up to $5,000 (to be adjusted annually for inflation) in qualifying adoption expenses is refundable. With this change, eligible taxpayers can get that much money back from the Treasury if their adoption credit amount is more than tax they owe.
Although the Republican tax reforms didn’t become law until July 4, 2025, the adoption credit change was one of several made retroactively effective for the full 2025 tax year.
That meant the new law superseded the previous one, which didn’t allow for any refundable tax credit, but which did let taxpayers carry unused credit amounts forward for use in up to five future tax years.
The prior law also said that the carry forward amount, was not eligible to be treated as a refundable credit. That disallowance was noted in 2025 tax return forms and instructions.
So, what were the adoption credit claimants supposed to do?
IRS promised to resolve the conflict: IRS Chief Executive Officer Frank J. Bisignano essentially asked these filers for patience during his March 4 testimony before the House Ways and Means Committee.
He told the tax-writing lawmakers, and affected filers, that the agency had determined carry forward amounts of the adoption credit for prior years are refundable up to $5,000 per qualifying child for the 2025 tax year (my emphasis).
The IRS is implementing this policy as “expeditiously as possible without disrupting the current filing season,” he added, promising that the agency would publish additional information on the topic “very soon.”
Until then, Bisignano told taxpayers to “continue to claim the credit as directed by the current forms and instructions during tax season, since the IRS is pursuing post-filing remedies to resolve this issue.”
Tax refunds sent automatically
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Adoption tax credit refunds on the way: We can quibble with the IRS definition of very soon, but the promised adoption tax credit change remedies for 2025 tax return filers have finally arrived.
The IRS announced on Oct. 16 that refunds to more than 50,000 taxpayers who benefited from the adoption tax credit carryforward are underway. The agency said the refund process for most eligible taxpayers should be completed by the end of the year.
The refunds came after the Treasury Department clarified its interpretation of the OBBBA change to the adoption tax credit. Under the new interpretation, and for tax year 2025 only, adoption tax credit carryforwards from tax years 2020 through 2024 can increase the amount of the adoption tax credit that is refundable in 2025, subject to the $5,000 per qualifying child limitation.
Taxpayers who filed 2025 returns by April 15 will generally receive any applicable adjustment automatically, according to the IRS.
Those who got an extension to file, as well as taxpayers whose accounts have identity theft indicators, freezes, dependency conflicts or other issues, will be reviewed later this year after the return is processed or the account issue is resolved.
No taxpayer action needed: Bisignano also emphasized that the IRS decision to automatically issue the adoption tax credit refunds, both those going out now and the ones that will be issued later this year, mean that affected families don’t have to file an amended tax return to get the money.
“This administrative change will help families access the tax benefits they are entitled to as quickly and simply as possible,” Bisignano said.
Families who adopted children and claim the tax credit on their 2025 returns also will receive notices from the IRS, generally within 30 days of the adjustment. The document will detail the amount they received, and whether the adjustment resulted in a refund or was applied towards another tax or non-tax debt.
As with any IRS communication, review the adoption tax credit change notice carefully, compare it with your 2025 tax return, and keep it with your tax records.
Adoption tax credit 2026 overview
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Adoption credit going forward: If you claim the adoption credit for the 2026 tax year or later, here’s an overview of the new tax break.
The credit can be claimed for eligible expenses related to international, domestic, private and public foster care adoptions.
Eligible expenses include reasonable and necessary adoption fees; court costs and legal fees; adoption related travel expenses, such as meals and lodging; and other expenses directly related to the legal adoption of an eligible child. Expenses may qualify even if the taxpayer pays them before an eligible child is identified. For example, some taxpayers pay for a home study at the beginning of the adoption process. These taxpayers can claim the fees as qualified adoption expenses.
The maximum adoption tax credit for 2026 is $17,670 per eligible child.
As noted earlier, the credit is now partially refundable. For 2026, that amount is $5,120 per qualifying child. However, any nonrefundable amount carried forward can’t be used to calculate a refundable portion for future tax years.
Income affects adoption tax credit eligibility. The 2026 tax year credit begins to phase out when individuals have modified adjusted gross income, or MAGI, greater than $265,080. (MAGI is modified adjusted gross income. It your adjusted gross income, or AGI, with certain deductions and non-taxable income sources added back. You can find more on MAGI in, shameless plug, the ol’ blog’s glossary.) The adoption credit is eliminated in 2026 once adoptive parents hit MAGI of $305,080 or more.
An eligible child must be younger than age 18. If the adopted person is older, they must be unable to physically or mentally take care of themselves.
Indian tribal governments now have the same authority as state governments to determine whether a child has special needs for the purpose of claiming the adoption tax credit. Taxpayers who adopt an eligible U.S. child with special needs may be able to claim the credit even if they didn’t pay any qualified adoption expenses.
The credit is not available to individuals who adopt their spouse’s child or children or to taxpayers who carry out a surrogate parenting agreement.
More adoption tax credit and adoption info: You can check out check out IRS.gov’s Adoption Credit page for more, as well as use the IRS’ Interactive Tax Assistant to determine your adoption tax credit eligibility. If you qualify, file Form 8839, Qualified Adoption Expenses, to figure exactly how much credit you can claim on your tax return.
As for the ol’ blog’s coverage, you read about some other IRS adoption tax credit challenges in my post “IRS needs a comprehensive adoption tax credit outreach plan.” If you’re interested in exploring adoption, my post “Senators want to enhance the adoption tax credit” has links to several adoption resources.
Finally, the many numerals in this post make it perfect for inclusion in the By the Numbers feature. The figure earning that honor this weekend is 50,000. Those are the adoptive parents who are getting their belated OBBBA refundable credit amounts.
