Adoption Tax Credit | Is the Adoption Credit Refundable​?

December, 22 2025 by Karen Thomas-Brandt, EA

Adopting a child is a significant commitment. Not only can it be emotionally challenging, but it can also be financially demanding. For that reason, you might be wondering, “Are there any tax benefits available for adoption?”

The short answer is yes; an adoption tax credit is available to qualifying taxpayers. The slightly longer – and some might say, even better – answer is that, with the passage of the One Big Beautiful Bill Act, the adoption credit has improved.
 

Before Legislation Passed

For tax years 2024 and earlier, an adoption tax credit was available to qualifying individuals. To qualify, a taxpayer must:
 

• Have an eligible child* who is under the age of 18 or physically/mentally incapable of self-care. Children of your spouse do not qualify.
• Have qualifying expenses* that are reasonable and necessary for adoption. This may include attorney and/or court fees, as well as travel expenses. However, if you adopt a child with special needs, as determined by a U.S. state or tribal government, you may be able to claim the full credit amount even if you had little or no out-of-pocket expenses.
• File a joint return if married.
• Meet the income requirements. For tax year 2024, the credit begins to phase out for modified adjusted gross incomes* (MAGIs) over $252,150 and completely phases out for MAGIs over $292,150.

Most importantly, for tax year 2024 and earlier, the adoption credit is non-refundable. This means that the credit can only reduce your tax bill, but it cannot reduce it below zero. If the credit amount exceeds the taxes you owe, the remaining amount is not refunded to you. Any unused portion of the adoption credit can be carried forward for up to five years. For 2024, the adoption credit was worth up to $16,810 for qualifying expenses.

Example 1: In 2024, Billy incurred qualifying expenses of $10,000 for the adoption of his son, Simon, which was finalized in the same year. Billy’s MAGI for 2024 was $75,000, and his tax liability was $6,500. Billy’s adoption credit for 2024 is $10,000 (the amount of his qualifying expenses); however, he will only get to use $6,500 (the amount of his tax liability). The remainder of his 2024 adoption credit, $3,500, will be carried forward for up to 5 years.
 

What the Rule Is Now

With the passage of the One Big Beautiful Bill Act (OBBBA), the adoption tax credit becomes partially refundable, up to $5,000 (indexed for inflation), starting in tax years beginning after December 31, 2024. The refundable portion of the credit cannot be carried forward. 

While the qualifications for receiving the adoption tax credit remain unchanged, the credit amount and income limits have been adjusted for inflation. For the 2025 tax year, the maximum credit of $17,280 begins to phase out if your MAGI exceeds $259,190. You cannot claim any credit if your MAGI is $299,190 or higher. As mentioned earlier, up to $5,000 of the $17,280 may be refundable. This means that even without a tax liability, you could receive up to $5,000 as a refund.

Example 2: In 2025, Rebecca’s adoption of a special needs child (as defined by her home state of California) was finalized. Rebecca incurred no out-of-pocket expenses for this adoption, but, because the adoption is designated as special needs, she will receive the full adoption credit of $17,280, $5,000 of which is refundable. Rebecca’s MAGI for the 2025 tax year was $50,000, and she had no tax liability. On her 2025 tax return, Rebecca will receive the $5,000 refundable portion of the adoption tax credit. However, the remaining $12,280 non-refundable portion will be carried forward for up to five years. The significant change here is that, despite Rebecca having no tax bill, she received the $5,000 refundable portion of the adoption tax credit. If the adoption had been finalized in 2024 or earlier, she would have received no refundable portion, and the entire nonrefundable amount would have been carried forward.

*The rules and qualification requirements for the adoption tax credit are lengthy and can be complicated. For more information about the adoption tax credit and detailed definitions of terms, please see IRS Form 8839.