What Is the Adoption Tax Credit?

The adoption tax credit is a partially refundable federal tax credit that helps offset qualified adoption expenses, such as court fees, travel costs and attorney fees. For the 2025 tax year, the credit is worth up to $17,280 per child. Taxpayers must meet income limits to claim the full credit, which begins to phase out for modified adjusted gross incomes (MAGI) above $259,190 and disappears at $299,190. If the credit exceeds your tax liability, the unused portion can be carried forward for up to five years.

A financial advisor can help you understand how tax credits may fit into your overall tax situation and identify other deductions you may qualify for.

What Is the Adoption Tax Credit?

The Adoption Tax Credit is a federal credit for qualifying taxpayers who participated in international, domestic, private or public adoption.

Like all tax credits, the Adoption Tax Credit is directly subtracted from the income tax you owe. This is often favorable to a tax deduction which only reduces your taxable income. The Adoption Tax Credit for tax year 2025 (due in 2026) is worth $17,280. This constitutes a $470 increase from 2024 when the Adoption Tax Credit was worth $16,810.

While previously nonrefundable, the credit is now partially refundable under the One Big Beautiful Bill Act, which signed into law by President Trump on July 4, 2025. The refundable portion of the credit is now worth up to $5,000, enabling eligible parents to receive $5,000 in cash even if they owe $0 in federal taxes.

For example, suppose a couple finalizes the adoption of a child in 2025 and incurs $20,000 in qualified adoption expenses. Their federal income tax liability for the year is $12,000. By claiming the full Adoption Tax Credit, the family eliminates their $12,000 tax liability and will receive a $5,000 refund. The remaining $280 can be carried forward up to five years.

How Does the Adoption Tax Credit Work?

The credit can be issued in one of two ways.

1. Claiming qualified expenses: The first way is to seek the credit through qualified adoption expenses. Qualified expenses are any adoption-related expenses such as:

Adoption agency fees
Legal adoption fees paid to an attorney
Court costs
Travel reimbursement including meals and lodging

To claim these expenses toward your credit, you’ll need to file Form 8839 with your tax return. The IRS will only provide a credit up to the amount of the expenses, not to exceed the credit maximum. This is for all adoption types; international, domestic, private or public.

2. Adopting a special needs child: If the child you adopt meets the eligibility for a special needs adoption then you will receive the full tax credit regardless of the expenses incurred.

For example, a couple adopts a child from the state who is deemed to have special needs. The couple paid no expenses for the adoption, but since the adoption qualifies as special needs, they will receive the full $17,280 credit.

Who Qualifies For The Adoption Tax Credit?

Eligible parties for tax year 2025 Adoption Tax Credit include:

Taxpayers adopting a child under 18 years of age. If the child exceeds 17 years old, he must be unable to physically care for himself for the adoptee to qualify for the ATC.
Taxpayers who participate in adoption that is international, domestic, public or private.
Taxpayers whose income is below $259,190 can claim up to the full credit.
Taxpayers whose income is between $259,190 and $299,190 can claim partial credit.

Ineligible parties for the Adoption Tax Credit include:

Taxpayers who adopted a spouse’s child.
Taxpayers whose income exceeds $299,190.

When Can I Claim the Adoption Tax Credit?

Depending on the type of adoption, the credit can be used if you finalized or started the adoption process in the previous year.

For international or foster care adoptions you cannot claim the credit until the adoption is final.
For domestic adoptions, you can choose to wait until the adoption is final or as the expenses are incurred. The full credit cannot be exceeded but you can spread out the credit over five years if your expenses span over that time period.

Keep in mind that whatever expenses you incurred have to be claimed for that tax year.

Example 1: Family A started and finalized an adoption in 2025. On its taxes, the family can claim the total qualified expenses up to the maximum 2025 ATC.
Example 2: Family B started a domestic adoption in 2023 and was finalized in 2025. They claimed $4,000 in qualified expenses in 2023. They can now claim the remaining allowable credit on their 2025 returns for any additional qualified expenses in 2025.

What Do I Need To File For The Tax Credit?

A document known as the Final Judgment of Adoption is required for all adoptions and additional documents are dependent on the adoption type. Foster adoption requires a subsidy agreement as the additional document. Domestic and international adoptions require a Home Study as the additional document, in addition to a receipt of all qualifying expenses.

Bottom Line

Like all tax credits, there are rules of eligibility required depending on factors that include the timeline, income, and filing status. Plus additional forms to produce and file with the correct information. With so many rules to follow, it leaves additional room for error on your tax return that could result in you leaving money on the table that you are owed. That being said, it’s important to keep up with the current laws each tax year so you know what to expect.

Tips for Saving on Your Taxes

A financial advisor can help you optimize your tax strategy for your family’s needs. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
To make sure you don’t miss a credit or deduction that you qualify for, use a good tax software. SmartAsset evaluated common tax filing services to find the best online tax software for your specific situation.