Adoption Tax Credit: How To Qualify For New $5,000 Refundable Credit

The expenses that come with adopting a child can add up quickly. On top of the adoption fees, there are attorney fees, home study fees and court costs, not to mention the travel expenses that accumulate when adopting a child who doesn’t live near you.

To offset some of those costs, an adoption tax credit is available to those who qualify — and it’s good for international, domestic, private and public foster care adoptions.

For 2025, the maximum credit per eligible child is $17,280, up from $16,810 in 2024. While the credit often doesn’t cover all costs, it can help people dealing with the assorted expenses of bringing an adopted family member home. A tax credit reduces your tax bill dollar-for-dollar.

And now this tax credit is even more valuable. The One Big Beautiful Bill Act, which was signed into law in July, added a major upgrade to the adoption credit: Effective in the 2025 tax year, up to $5,000 of the credit is refundable, meaning the IRS will send you money, even if you don’t owe taxes. Both the full credit amount and the refundable portion are set to increase with inflation each year.

What adoptions are covered under the credit?

To be eligible for this credit, the adopted child:

• must be under the age of 18, or physically or mentally incapable of caring for themselves, regardless of their age
• can’t be your spouse’s child
• can’t be the result of a surrogacy

You can, however, claim the credit more than once if you adopt more than one child.

“If someone was to adopt twins or two siblings, they would get that credit twice,” says Josh Youngblood, an enrolled agent and founder of the Youngblood Group in Dallas.

For children with special needs, the full amount of the credit is available even if the taxpayer didn’t incur qualifying expenses, Youngblood adds. The IRS deems a child with special needs as one who can’t or shouldn’t be returned to their parents’ home, or isn’t likely to be adopted without assistance to the adoptive family.

Those with non-special-needs adoptions, however, will need to report qualified expenses. In those cases, Youngblood recommends keeping an expense spreadsheet to stay organized.

Who qualifies for the adoption credit?

There are income limits that restrict who qualifies to claim the adoption tax credit. The income limits are tied to modified adjusted gross income (MAGI), which is adjusted gross income with some items added back in (see the IRS instructions for line 7 of Form 8839).

Before the new tax law made a portion of the tax credit refundable, not every adoptive family was helped by the credit, says Josh Kroll, adoption subsidy resource center coordinator with Families Rising, a nonprofit that helps people navigate the challenges of foster care and adoption.

Some families were told incorrectly that they’d get a big check. That was “usually not the case,” Kroll says.

That’s because to enjoy the full value of the credit, you needed to have a large tax bill.

In Kroll’s experience before the new refundable portion was added to the tax credit, families with adjusted gross incomes of about $200,000 were more likely to benefit from the credit than those with less than $30,000, for example.

But that was before the new tax law, back when the entire tax credit was nonrefundable. Now, up to $5,000 is refundable to the taxpayer. That means that even if you don’t have a tax liability, you can get up to $5,000 sent to your bank account.

Something else to consider: If you have adoption expenses that exceed your tax bill in any given year, you can carry-forward those expenses on future tax returns, thus reducing your tax bill for up to five years (up to the maximum credit amount). But you can’t carry forward the $5,000 refundable portion of the tax credit.

Also, if you paid an agency to help you start the adoption process, but you still haven’t been matched with a child, you can still claim that expense on your taxes, Kroll says. “That gets missed a lot, and that’s something that can be really useful for those families. It can help them to pay those next fees that are coming up in the future.”

Some states have their own adoption tax credits as well, he says. (Check your state’s income and sales tax rates.)

How to calculate the credit

To take the federal adoption tax credit, taxpayers need to fill out Form 8839.

For those adopting a child without special needs, you must document direct expenses incurred during the adoption process, Youngblood notes. Qualified expenses include:

• Adoption agency and attorney fees
• Court costs
• Travel expenses (including meals and lodging)
• Home study fees and other pre-adoption costs
• Other direct costs related to the legal adoption

Examples of expenses that don’t qualify include those incurred while adopting a spouse’s child or the cost of surrogacy arrangements, Youngblood says. You also can’t include expenses that were covered by another federal credit or deduction, or costs paid by federal, state or local programs. Expenses covered by employer adoption assistance programs also don’t qualify for the credit.

While you can calculate this credit without the help of a tax professional, you may want to reach out to one for advice, Youngblood says. Even if you still prepare your taxes on your own, some enrolled agents, Youngblood says, will offer consultations at an hourly rate.