Adoption Tax Credit: What Adoptive Families Should Know

The federal tax credit for adoption can help eligible families recover some of the qualified expenses they pay during the process.

A tax credit applies to the tax calculated on your federal return. A tax deduction works differently because it reduces the income subject to tax.

The amount available to an adoptive family depends on several factors, including qualified expenses, modified adjusted gross income, employer-provided adoption benefits, and amounts previously claimed for the same child.

The amount listed for 2026 is a maximum, not a credit every adoptive family will receive.

Is the Adoption Tax Credit Refundable?

Part of the credit may be refundable. Federal law changed the adoption credit beginning with the 2025 tax year. For 2026, up to $5,120 per eligible child may be refundable.

The rest of an eligible credit remains nonrefundable. When a family cannot use all of that portion in a given year, the unused amount may generally be carried forward for up to 5 years.

Carryforward amounts stay nonrefundable. An unused nonrefundable credit from an earlier year cannot later become part of the refundable portion of the credit.

Income can reduce or eliminate the adoption tax credit. The IRS bases this calculation on modified adjusted gross income, or MAGI.

One question families often have is whether a particular payment counts toward the credit.

The IRS defines qualified adoption expenses as reasonable and necessary expenses directly related to the legal adoption of an eligible child. They can include:

Some adoption-related payments fall outside the federal definition of qualified adoption expenses. The IRS excludes expenses connected with surrogate parenting arrangements and the adoption of a spouse's child, among other exclusions.

Families also need to account for expenses paid or reimbursed through an employer adoption assistance program. The same expense cannot be used to receive both the income exclusion for employer-provided adoption benefits and the adoption tax credit.

Financial assistance for an expectant mother deserves individual review. These expenses can involve state adoption law as well as federal tax rules, so families should have a qualified tax professional determine whether a specific payment can be included in their adoption tax credit calculation.

This is where the credit can become confusing for families pursuing domestic newborn adoption. An adoption may begin in one calendar year and finish in another. Some expenses may be paid before a family has even been connected with an expectant mother.

For a domestic adoption, qualified expenses paid before the year the adoption becomes final are generally claimed in the following tax year.

Suppose a family paid qualified adoption expenses in 2025 and the adoption had not become final by the end of that year. Those expenses would generally be considered for the credit on the family's 2026 return.

When qualified expenses are paid during the year the adoption becomes final, they are generally claimed for that year. Qualified expenses paid in a later year are generally claimed in the year of payment.

For families, the useful habit is simple: record when each expense was paid. The date can matter just as much as the type of expense when a tax professional determines when the credit can be claimed.

Families sometimes spend a significant amount on a domestic adoption opportunity that does not lead to placement or finalization.

Federal tax rules recognize this situation. Qualified expenses from an attempted or unsuccessful domestic adoption of an eligible U.S. child may still qualify for the adoption tax credit. The IRS generally applies the timing rules used for domestic adoptions that have not yet become final.

Keep the records from that adoption opportunity even after it ends. If another adoption opportunity follows, keeping the expenses separate will make it easier for your tax professional to determine how the federal rules apply.

This is also an area where individual circumstances matter. Families with expenses connected to more than one adoption opportunity should have their claims reviewed before filing.

Adoption expenses rarely arrive all at once. A family may make payments to different professionals over many months, sometimes across two tax years.

We recommend creating a dedicated record for adoption expenses from the beginning. Keep:

• Receipts and invoices
• Proof of payment
• Dates each expense was paid
• Records of employer reimbursements or adoption benefits
• Adoption and placement documents relevant to your tax filing
• Copies of prior Forms 8839 if you carry unused credit into another year

This saves families from trying to reconstruct a year or more of expenses when tax season arrives.

It also gives a tax professional the information needed to distinguish between an expense that was paid, an expense that may qualify, and an expense that can be claimed in a particular tax year. If a payment seems unusual or you are unsure whether it qualifies, flag it for your tax professional instead of making that determination yourself.

Families claim the federal adoption tax credit using IRS Form 8839, Qualified Adoption Expenses. The form is also used to calculate employer-provided adoption benefits that may qualify for exclusion from income.

Form 8839 asks for information about the eligible child as well as the expenses and benefits involved.

The child's identifying number may be a Social Security number, Adoption Taxpayer Identification Number, or Individual Taxpayer Identification Number, depending on the circumstances.

Families in a pending domestic adoption sometimes do not have access to the child's Social Security number when they need to file a federal return. An ATIN is a temporary identification number available in certain pending adoption situations. Eligible taxpayers apply for one using Form W-7A. The IRS has specific placement, residency, and dependency requirements for issuing an ATIN, so families should review those requirements before applying.

Some employers help employees with adoption expenses through a qualified adoption assistance program.

Families may be able to benefit from both employer-provided adoption assistance and the federal adoption tax credit. The expenses used for each benefit must be accounted for correctly.

An expense covered through an eligible employer benefit cannot also be used to claim the adoption tax credit for that same amount. Form 8839 is used to calculate both the credit and any employer-provided adoption benefits that may qualify for exclusion from income.

Your tax professional will need to know which expenses your family paid and which were reimbursed, so keep your employer reimbursement statements with your adoption records.

The maximum adoption tax credit applies per eligible child. If a family adopts more than one eligible child, qualified expenses may be considered separately for each child, subject to the federal limits and other applicable rules. The refundable portion is also determined per eligible child.

Families who have claimed an adoption credit in the past can also qualify again in connection with a later adoption when the federal requirements are met.

For more than 25 years, Angel Adoption has helped families understand what to expect as they prepare for newborn adoption. Questions about expenses are part of that preparation, along with the home study, creating an adoptive family profile, connecting with an expectant mother, and understanding what happens after a match.

We can answer questions about the adoption process and the costs families may encounter along the way. For advice about your tax return or the amount of adoption credit available to you, speak with a qualified tax professional.