The Adoption Tax Credit is a federal tax benefit designed to help families offset the often significant costs associated with adopting a child. Instead of reducing taxable income (like a deduction), it reduces your federal tax bill dollar-for-dollar based on qualified adoption expenses you incur. The object of the deduction is to encourage Americans to grow their families through adoption, so the tax credit is adoption-friendly.
The 2025 tax year brings some of the most meaningful updates to the law in over a decade.
Increased credit cap
For tax year 2025 (the return most people file in early 2026), the maximum Adoption Tax Credit will be $17,280 per eligible child. It’s higher than it was for the 2024 tax year, when it was around $16,810).
This credit applies per child, not per family or per year, though it’s tied to expenses paid for that individual adoption. Families adopting more than one child — such as sibling groups — can usually take the credit for each of the children they adopt.
Partial refundability
One of the biggest changes for 2025 is that a portion of the Adoption Tax Credit is now partially refundable, which means that it can provide payments to adoptive parents beyond what they would have owed in taxes.
Before 2025, the Adoption Tax Credit was entirely nonrefundable — meaning that it could only reduce your federal tax bill to zero. If the credit came to more than your tax liability, you couldn’t receive the excess as a refund. You could carry the credit forward, but there would be no refund of the excess amount.
Starting in 2025, up to $5,000 of the Adoption Tax Credit per child is refundable, even if you have little or no federal tax liability.For example, if you owe $120 in taxes before the credit and you are eligible for the full $5,000 credit, you could receive a $5,000 refund. Before 2025, your tax bill would have been zero, but you would not have received a refund. This makes adoption more affordable for families with modest incomes.
Income limits
The Adoption Tax Credit is not available to the highest income families. For tax year 2025, the credit becomes smaller at incomes around $259,190. The credit available to you grows smaller as your income increases. It is completely unavailable for families whose taxable income is higher than $299,190.
These are the changes in the adoption tax credit for this year. The IRS provides all the details on the law.