Adoption Tax Credit 2025: Eligibility, Refundability, and How It Works
The 2025 adoption tax credit is now fully refundable, meaning thousands of adoptive families can receive money back even if they don't owe taxes—creating real financial relief during one of life's most meaningful journeys.
This significant change transforms how families can afford adoption, potentially putting thousands of dollars directly back in your pocket to support your growing family.
Understanding how the 2025 adoption tax credit works can help reduce the financial stress that adoption sometimes brings.
What if you could maximize every dollar of the 2025 tax credit while creating a clear financial plan?
Adoption Tax Credit 2025: What It Is and Why It Matters
The federal adoption tax credit exists to help families offset the significant costs of adoption.
Created by Congress to encourage and support adoption, this tax benefit recognizes that building families through adoption serves both individual families and society as a whole.
Unlike previous years, the tax credit's refundable status means eligible families can receive the full benefit regardless of how much they owe in taxes.
This isn't just a tax deduction that reduces your taxable income—it's a dollar-for-dollar credit that directly reduces what you owe the IRS or puts money back in your pocket.
For adoptive families facing costs that can range from $20,000 to $40,000 or more, this credit provides meaningful financial relief exactly when it's needed most.
Check out the official Adoption Tax Credit page of the IRS.
How Much is the Adoption Tax Credit?
The 2025 adoption tax credit amount is $16,810 per child. This figure is adjusted annually for inflation, which is why it increases each tax year—in 2024, the amount was $16,320 per child.
Here's what this means practically:
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If you finalize an adoption in 2025, you can claim up to $16,810 in qualifying adoption expenses for that child when you file your 2025 tax return in early 2026.
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If you adopt siblings or multiple children, you can claim the credit for each child, significantly multiplying your potential savings.
This maximum applies to each adopted child individually, so families adopting siblings could potentially claim $33,620 for two children or $50,430 for three children, assuming they have qualifying expenses that meet or exceed these amounts.
Is the Adoption Tax Credit Refundable in 2025?
Yes—the 2025 adoption tax credit is refundable up to $5,000 per child.
What does "refundable" mean? It means that even if you don't owe any federal income taxes, or if the credit exceeds what you owe, you'll still receive up to $5,000 per adopted child as a direct payment from the IRS.
Here's how it works in practice:
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Example 1: You owe $3,000 in federal taxes and claim a $16,810 adoption credit. The first $3,000 eliminates your tax debt, and you receive $5,000 as a refund check. The remaining $8,810 carries forward to future tax years.
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Example 2: You owe $10,000 in federal taxes and claim a $16,810 adoption credit. Your tax debt is completely eliminated, you receive $5,000 as a refund, and $1,810 carries forward to next year.
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Example 3: You owe zero federal taxes but claim a $16,810 adoption credit. You receive the full $5,000 refundable portion immediately, with $11,810 carrying forward for future years.
This refundable feature addresses one of the biggest frustrations families faced in previous years—having significant adoption costs but not enough tax liability to benefit from the credit immediately.
Helpful Information
2025 Adoption Tax Credit Income Limits: Will You Qualify?
The 2025 adoption tax credit begins to phase out for families with Modified Adjusted Gross Income (MAGI) above $252,150, and completely phases out at MAGI of $292,150.
Here's how the phase-out works:
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Full Credit: MAGI of $252,150 or less = full $16,810 credit
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Partial Credit: MAGI between $252,150-$292,150 = reduced credit amount
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No Credit: MAGI above $292,150 = no credit available
Your MAGI includes most of your income sources: wages, self-employment income, investment income, and most other taxable income, with certain adjustments.
For most families, MAGI is very close to their Adjusted Gross Income (AGI) found on their tax return.
If you're married, you must file jointly to claim the adoption credit, and the income limits apply to your combined income.
Planning Tip: If your income is near the phase-out range, consider timing strategies like contributing more to retirement accounts or other deductible expenses in the year you plan to claim the credit.
What Expenses Count Toward the Adoption Tax Credit?
The IRS allows you to claim qualifying adoption expenses that are "reasonable and necessary." For most families working with agencies like American Adoptions, this includes:
Agency and Professional Fees:
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Adoption agency fees and services
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Legal fees for adoption proceedings
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Home study costs
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Document preparation and processing
Travel and Accommodation:
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Travel expenses to meet your child or attend court proceedings
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Lodging costs during adoption-related trips
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Meals during necessary adoption travel
Court and Administrative Costs:
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Filing fees and court costs
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Required medical examinations
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Translation services for international documents
Important Exclusions: The credit cannot be used for expenses that were reimbursed by your employer, government programs, or other sources. You also cannot "double-dip" by claiming expenses you've already deducted elsewhere on your tax return.
Keep detailed records of all adoption-related expenses, including receipts, invoices, and payment confirmations.
Your adoption agency should provide you with documentation of fees paid, which will be essential when filing your return.
Dig deeper: Types of Adoption Fees
Step-by-Step: How to Claim the Adoption Tax Credit in 2025
Claiming the 2025 adoption tax credit requires completing IRS Form 8839 and attaching it to your regular tax return. Here's the process:
Before You Begin:
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Gather all adoption-related receipts and documentation
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Confirm your child's adoption was finalized during 2025
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Calculate your Modified Adjusted Gross Income
Professional Tip: Many families find it worthwhile to work with a tax professional familiar with adoption credits, especially given the complexity of the carryforward rules and income calculations.
Beyond Federal: State Adoption Tax Credits and Extra Benefits
Alabama – Adoption Tax Credit (refundable)
Amount: $2,000 per child for a private intrastate adoption (Alabama-resident child) finalized in 2023–2027.
If the adopted child is from out-of-state (not an AL resident), the credit is $1,000.
Arizona – Adoption Expense Deduction
Amount: Up to $40,000 of qualified adoption expenses may be subtracted from Arizona income in the year the adoption is finalized (for tax years 2023–2025).
Eligible expenses include agency, court, medical, and travel costs; deduction is per adoption and not available for stepchild adoptions.
Arizona Revised Statutes § 43-1022
Arkansas – Adoption Tax Credit
Amount: 20% of the federal adoption tax credit
For example, if you claim a $10,000 federal credit, Arkansas allows a $2,000 state credit. The credit cannot exceed your Arkansas income tax liability.
Indiana – Adoption Tax Credit (refundable)
Amount: up to $2,500 per eligible child
Indiana’s credit is available for any adoption that qualified for the federal credit (e.g. private domestic or international) and was finalized during the tax year. Unused credit beyond taxes owed is refunded.
Ind. Code § 6-3-3-13; Indiana DOR Bulletin #111
Iowa – Adoption Tax Credit (refundable)
Amount: Up to $5,000
This credit is refundable or may be carried forward; it is available in the year the adoption becomes final (covering expenses paid in that year or earlier).
The child must be placed by a licensed agency or court in Iowa, and the credit is one-time per child.
Iowa Code § 422.12A; Iowa Dept. of Revenue
Kansas – Adoption Tax Credit (nonrefundable)
Amount: 100% of the federal adoption credit for adoptions finalized in 2024.
Kansas residents must file as full-year residents to claim this credit.
K.S.A. 79-32,202; Kansas Dept. of Revenue
Louisiana – Adoption Tax Credit (refundable)
Amount: $5,000 refundable credit for each eligible child under age 3 who is adopted from private care.
The credit is claimed in the year the adoption is finalized and is one-time per child. (This program was enacted in 2022 to encourage private infant adoptions.)
Mississippi – Adoption Tax Credit (nonrefundable)
Amount: $10,000 per child if the child was a Mississippi resident at the time of adoption, or $5,000 per child if the child was from outside Mississippi.
The credit is claimed in the year the adoption becomes final and any unused amount may carry forward up to 5 years.
Missouri – Adoption Tax Credit (Nonrefundable)
Amount: up to $10,000 for qualified adoption-related expenses per child.
This credit now applies to any lawful adoption (effective 2021); previously it was limited to special needs adoptions.
Expenses such as adoption fees, court costs, and legal fees can be claimed. The credit can be carried forward up to 5 years if not fully used in the first year.
Mo. Rev. Stat. § 135.325; Missouri DOR
Montana – Adoption Tax Credit (refundable)
Amount: $5,000 for each child adopted, or $7,500 per child if the child was in Montana’s foster care system.
Applies to adoptions finalized on or after July 1, 2022. Any Montana resident taxpayer who adopts an “eligible child” (under 18, not the adopter’s stepchild) can claim the credit; if the credit exceeds tax due, the excess is refunded.
Montana HB 225 of 2023; Montana Dept. of Revenue
North Dakota – Adoption Tax Credit (nonrefundable)
Amount: 10% of the federal adoption credit claimed for the year
For example, if you utilize a $15,000 federal adoption credit, ND allows a $1,500 state credit.
The North Dakota credit is capped at 50% of your state tax liability per year; unused credit can carry forward up to 3 years.
N.D. Cent. Code § 57-38-30.3(1)(a)
Oklahoma – Adoption Expense Credit (refundable)
Amount: up to $2,000 per adoption for single filers or $4,000 per adoption for joint filers.
It can be claimed in the year the adoption is finalized, and importantly, it is also available for certain failed adoption attempts (expenses for a proposed adoption that did not result in a final decree).
Okla. Stat. tit. 68, § 2357.601
Utah – Adoption Expenses Credit: refundable
Amount: up to $3,500 for adoption-related expenses if the adoption was finalized during the tax year. This refundable credit is income-limited (available to families with AGI under $55,000 joint, or $27,500 single).
Families above those income thresholds may instead claim a smaller nonrefundable credit (code “AS”) – historically $1,000 for adopting a child with special needs.
West Virginia – Nonfamily Adoption Credit
Amount: One-time $4,000 credit for each “nonfamily” adoption, meaning adoption of a child who is not the taxpayer’s stepchild or close relative.
The child must be under 18 at adoption. The credit is nonrefundable (any excess can be spread over up to 3 years).
Wisconsin – Adoption Expenses Deduction
Amount: Up to $5,000 per adopted child can be deducted from Wisconsin taxable income in the year the adoption is finalized.
This subtraction covers adoption fees, court costs, attorney fees and other nonrecurring adoption costs paid during the adoption process (including expenses from the two years prior to the finalization).
If multiple children are adopted, up to $5,000 may be deducted for each child.
Why the Adoption Tax Credit Matters for Families
The 2025 adoption tax credit transforms one of life's most meaningful investments—building your family through adoption—into a more accessible reality.
Every dollar spent on adoption represents an investment in creating the family you've always envisioned.
The agency services, legal protections and professional guidance that contribute to adoption costs exist to ensure your child comes home safely and your family is built on a solid foundation.
The 2025 adoption tax credit acknowledges that these expenses, while significant, lead to something priceless—the joy of parenthood and the completion of your family.
Other Adoption Financing Options
While the 2025 adoption tax credit provides substantial support, most families benefit from a comprehensive financing strategy that combines multiple resources:
The most successful approach often combines several of these options, with the adoption tax credit serving as a cornerstone of the overall financial plan.
How American Adoptions Supports Families Beyond the Tax Credit
At American Adoptions, we understand that affording adoption involves more than just understanding tax benefits—it requires comprehensive support throughout your entire journey.
Financial Planning and Documentation Support
Our experienced team helps families understand all available financial resources, from federal tax credits to state benefits to employer programs.
We work closely with families to provide detailed documentation of all adoption-related expenses, ensuring you have everything needed to maximize your tax benefits and simplify the filing process.
Our financial guidance includes helping you structure a budget and timeline, making the adoption process more manageable financially.
Transparent and Predictable Pricing
We believe every family deserves clear, upfront information about adoption costs with no hidden fees or surprise expenses.
Our comprehensive fee structure helps you plan effectively and take full advantage of the 2025 adoption tax credit's benefits.
We provide detailed cost breakdowns early in the process, allowing you to plan your financing strategy and understand exactly how the tax credit will apply to your specific situation.
Nationwide Expertise with Local Knowledge
As a licensed adoption agency working in all 50 states, we understand how state-specific benefits and employer programs can work alongside federal tax credits.
Our team stays current on changing regulations and benefits across different states, ensuring you don't miss any available financial support opportunities. This nationwide perspective, combined with local expertise, helps maximize every dollar of support available to your family.
Start Your Adoption Journey with Confidence
The 2025 adoption tax credit represents an unprecedented opportunity for families to build their families through adoption with greater financial security than ever before.
With up to $5,000 in refundable benefits and comprehensive carryforward provisions, this year's changes make adoption more accessible to families across all income levels.
Fill out our form to speak with our specialists about your financial options and begin building the family you've always dreamed of.
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