Adopting a child can be one of the most meaningful decisions a family makes, but it can also be expensive. Legal fees, agency costs, and travel expenses often add up quickly during the adoption process. To help ease that financial burden, the Internal Revenue Service (IRS) offers a tax benefit known as the Adoption Tax Credit.
For the 2025 tax year, the Federal Adoption Tax Credit has been increased to a maximum of $17,280 per child, with a significant new provision allowing up to $5,000 of that amount to be fully refundable. This change, introduced under the 'One Big Beautiful Bill' passed in July 2025, means that eligible families can receive a cash refund of up to $5,000 even if they have zero federal tax liability.
Previously, the credit was entirely non-refundable, serving only to offset taxes owed. While the credit remains a powerful tool to mitigate the high costs of agency fees, legal counsel, and travel, tax professionals atTurboTaxand theIRSwarn that the benefit is subject to strict income phase-outs and specific filing requirements that many families overlook.
The Adoption Tax Credit is designed to help adoptive parents recover some of the costs associated with bringing a child into their family. Qualifying expenses may include adoption agency fees, attorney costs, court expenses, and travel related to the adoption process. According to adoption data estimates, between 100,000 and 150,000 adoptions take place in the United States each year. Despite that, many eligible families fail to claim the tax credit. Tax professionals say confusion about eligibility requirements and filing procedures is one of the main reasons the credit remains underused.
The IRS emphasises that the Adoption Tax Credit is not a stimulus payment or a new government programme. It is a long-standing provision within the US tax code that must be actively claimed when filing a federal tax return.
For the 2025 tax year, the maximum credit allowed is $17,280 for each qualifying adopted child. However, the full amount is not always refunded. Up to $5,000 of the credit is refundable, meaning taxpayers could receive that amount even if their federal tax liability falls to zero. The remainder of the credit is non-refundable, which means it can only be used to reduce taxes owed. If a taxpayer cannot use the full non-refundable portion in one year, the remaining credit may be carried forward for up to five years to offset future tax bills.
Not all families qualify for the full credit. The IRS applies income thresholds that gradually reduce the benefit for higher-earning households. For the 2025 tax year:
Because of these limits, families with higher incomes may receive only a partial credit or none at all.
To claim the credit, the adoption must meet IRS guidelines. In general, the child must be under the age of 18 or physically or mentally incapable of self-care. Qualified expenses typically include:
However, the credit cannot be claimed for adopting a spouse's child, such as a stepchild. Taxpayers must also maintain clear documentation showing the expenses they incurred during the adoption.
Source: International Business Times UK
