Plan Now: Major Adoption Tax Credit 2026 Changes You Need to Know

If you’re considering adoption or in the process, planning to finalize it soon, there’s important news you should know. The federal Adoption Tax Credit is getting an update, and these changes could offer meaningful financial support to adoptive families.

At Lifetime Adoption, we understand that the cost of adoption can be overwhelming, but the Adoption Tax Credit is one way families can recover a portion of their qualified expenses. It is important to understand what the Adoption Tax Credit is, how it works, and the changes regarding refundability.

Table of Contents

• What Is the Adoption Tax Credit?
• Recent Updates to the Adoption Tax Credit
• What Does “Partially Refundable” Mean?
• The Special Needs Exception
• Practical Tips for Adoptive Families
• Adoption Tax Credit for 2026

What Is the Adoption Tax Credit?

The Adoption Tax Credit is a tax credit provided by the federal government to help families with the costs of adoption. This credit applies to a variety of qualified adoption expenses, including:

• Adoption agency and attorney fees
• Home studies (including background checks)
• Court costs and finalization fees
• Travel related to the adoption
• Pregnancy-related expenses
• Other necessary and reasonable adoption-related expenses

Unlike a tax deduction, which reduces your taxable income, a tax credit reduces the amount of tax you owe, dollar for dollar. For example, if you owe $6,000 in taxes and qualify for a $5,000 Adoption Tax Credit, your tax bill is reduced to $1,000. The credit is available for each child adopted, which is particularly helpful for families adopting twins or sibling groups.

Recent Updates to the Adoption Tax Credit

Several key updates to the Adoption Tax Credit took effect beginning in 2025. These include:

• The maximum Adoption Tax Credit amount increased to $17,280 per child for adoptions finalized in 2025.
• The credit will now be automatically indexed to inflation, meaning it will adjust (without an act of Congress) in future years to keep pace with rising costs.
• The income phase-out range begins at a modified adjusted gross income (MAGI) of $259,190 and ends at $299,190.
• A new provision allows for partial refundability. Families who finalized their adoption in 2025 may receive up to $5,000 as a refundable credit, even if they do not owe that amount in taxes. Those who will finalize in 2026 may receive a refundable credit of up to $5,120.

These updates are especially significant for families with moderate or lower incomes, who in the past may not have been able to benefit from the Adoption Tax Credit fully.

What Does “Partially Refundable” Mean?

One of the most impactful changes to the Adoption Tax Credit is partial refundability. Previously, the credit was nonrefundable, which meant families could only use it to offset taxes they owed. If they owed little or no tax, they couldn’t access the full credit.

For adoptions finalized in 2025, up to $5,000 of the credit is refundable. That means if your taxes owed are low, you can still receive a refund check of up to $5,000, depending on your qualified expenses and income level. For adoptions finalized in 2026 (tax returns filed in 2027), the refund increases to up to $5,120 refundable.

This change makes the Adoption Tax Credit more accessible to a wider range of adoptive families. It also provides a benefit for a wider range of adoptions, like kinship and through the foster system.

The Special Needs Exception

If you adopt a child who is determined by your state to have special needs, you may be eligible for the full amount of the Adoption Tax Credit, even if you didn’t incur significant out-of-pocket expenses. In many foster-to-adopt cases, the adoption costs are low or even waived by the state, but families can still qualify for the credit.

Each state defines “special needs” differently, but it often includes factors such as age, sibling status, race, or medical and emotional conditions. Your adoption professional can help you obtain the proper documentation from the state confirming the child’s eligibility.

Practical Tips for Adoptive Families

If you are planning to adopt or are already in the process, here are a few practical steps you can take now to prepare to maximize the Adoption Tax Credit benefits for your adoption:

1. Keep complete records of all adoption-related expenses, including receipts, mileage logs, legal documents, and travel costs.
2. Ask your employer if they offer adoption assistance benefits. Employer-provided adoption benefits may also qualify for a tax exclusion.  If they don’t have adoption benefits, advocate for them. You can find help online with the Adoption-Friendly Workplace Toolkit.
3. Work with a CPA who is familiar with adoption and the Adoption Tax Credit. Filing correctly is essential to claiming the full benefit (and avoiding an audit!)
4. Retain any documentation for children with special needs, as this will likely be required to claim the full Adoption Tax Credit in those special needs situations.

Adoption Tax Credit for 2026

If you’re finalizing an adoption in 2026, here’s what you need to know about the Adoption Tax Credit when you file your taxes in 2027.

Maximum Credit: $17,670

The IRS adjusts the Adoption Tax Credit each year for inflation. For adoptions finalized in 2026, the maximum credit has increased to $17,670, up from $17,280 in 2025.

Partially Refundable — Up to $5,120 Back

Thanks to the partial refundability of the Adoption Tax Credit (effective as of July 2025), families whose federal tax liability is less than the full credit amount are not left empty-handed. For 2026 adoptions filed in 2027, you can receive a refund of up to $5,120 — even if you don’t owe enough in taxes to use the full credit.

For example, if your federal tax liability is $12,000 and your adoption expenses qualify you for the full $17,670 credit, you could reduce your tax bill to $0 and receive up to $5,120 back as a refund.

Special Needs Adoptions

If you adopted a child with special needs, you may be able to claim the full $17,670 credit regardless of your actual out-of-pocket adoption expenses — a significant benefit for families who adopt through foster care.

Income Limits Still Apply

The credit begins to phase out for modified adjusted gross incomes (MAGI) above a certain threshold and is eliminated completely at higher income levels. Check the IRS instructions for Form 8839 or consult a tax professional for the exact 2026 phase-out range once it is published.

The Adoption Tax Credit

The Adoption Tax Credit can be a valuable financial resource for adoptive families, helping to reduce the cost of building your family through adoption. The new updates, including an increased credit amount and partial refundability, are welcome changes that make the credit more effective and inclusive.

At Lifetime Adoption, we are here to walk alongside you, not just during the adoption process but in preparing for what comes next. We encourage all adoptive families to take time to learn about the Adoption Tax Credit and speak with a qualified tax advisor about how to make the most of this benefit.

Disclaimer: This blog post is for informational purposes only and is not intended to provide legal or tax advice. Please consult a qualified tax professional for guidance related to your specific situation.

Editor’s Note: This article was originally published on July 16, 2025, and has since been updated.