IRS Tax Breaks for Adoption: What You Need to Know for 2025

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last updated 9 July 2025

Growing your family through adoption can be a wonderful experience, but it can be costly. However, there’s a federal tax break that might help.

The adoption tax credit is a refundable federal credit that allows adoptive parents to claim specified amounts of qualified adoption expenses to lower their federal tax liability.

And President Donald Trump's so-called 'One Big Beautiful Bill' that was signed into law on July 4, includes a provision that enhanced the adoption tax credit and made the tax break partially refundable, allowing parents to claim up to $5,000 in credits.

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The adoption tax credit is also indexed to inflation, adding an incentive for households looking to grow their families via adoption.

The credit is available for each child adopted, whether via public foster care, domestic private adoption, or international adoption.

If you’re interested in adopting or have adopted a child and believe you might qualify for the credit, here’s what you need to know.

What are the 2025 adoption tax credit amounts?

As mentioned, the adoption tax credit is designed to help families offset the costs of adoption, whether domestic, private, through foster care or foreign.

As a partially refundable tax break, you may receive only a part of the credit as a tax refund, even if your tax liability is zero.

For tax year 2025 (returns you'll file in early 2026), the maximum adoption credit amount is $17,280, per the IRS.
Trump's 'big beautiful bill' enhanced the refundable portion of the credit to $5,000 and indexed the credit to inflation. The adoption tax break is also partially refundable after December 31, 2024. (More on that below).

The amount you receive will also depend on your income threshold, which is indexed for inflation:

For the 2025 tax year, the tax credit begins to phase out for taxpayers with a modified adjusted gross income (MAGI) above $259,190. The credit completely phases out once your MAGI reaches $299,190.

Who is eligible for the adoption credit?

To qualify for the maximum amount of the adoption tax credit for the 2025 tax year you’ll have to make under $259,190. The tax benefit also covers costs related to an adoption if the child meets the following criteria:

The child is under 18. If the child turns 18 during the year of the adoption, the child is eligible for the part of the year they were under 18 years of age.
The child is disabled or physically or mentally unable to take care of themself.
The state welfare agency determines a child has special needs (more on that below).

Adopting a child with special needs

A special-needs adoption refers to children whose risk factors often make them more difficult to place, according to the state’s child welfare agency.

For this tax credit, a special needs child does not refer to children with disabilities.

When it comes to the adoption tax credit, a child has special needs if:

The child is a citizen or resident of the United States or territories at the time of adoption.
The state determines the child can’t or shouldn’t be returned to their parent’s home.
The state determines the child wouldn't be adoptable without financial assistance.

There’s one exception: The federal tax credit is not available for foreign children with ‘special needs’ who are adopted.

What are qualified adoption expenses?

The adoption tax credit can also help you pay off certain adoption expenses, but you’ll have to fill out IRS Form 8839. The form will allow you to quantify the amount of your adoption credit and any employer-provided benefits you can exclude from your income.

Some qualified adoption expenses include, but are not limited to:

Legal fees paid to your attorney and related court costs
Fees you paid to an adoption agency
Re-adoption expenses related to the adoption of a foreign child

You can also expense traveling costs — including the amount spent on meals and lodging away from home — that are directly related to the adoption process.

What isn’t a qualified adoption expense?

There are just six expenses that can’t be claimed under the adoption tax credit. The tax break does not cover:

The adoption of stepchildren
Paying fees or expenses related to surrogate parenting
Expenses that have been reimbursed by your employer or otherwise

Additionally, the adoption credit doesn't cover expenses allowed as a credit or deduction under another federal tax code provision, or situations in which you have received funds under any state, local, or federal program.

Finally, you cannot claim adoption expenses that violate state or federal law.

Trump's enhanced adoption tax credit

Trump’s major tax cuts and spending package, dubbed ‘One Big Beautiful Bill,’ was signed into law on July 4, 2025, and the legislation includes a provision that enhances the adoption tax credit.

The OBBB makes the adoption tax credit partially refundable and indexes it to inflation, allowing parents to claim up to $5,000 in refundable adoption tax credit.
Another provision allows Indian tribal governments to determine whether a child has special needs for the adoption credit.
The amendments apply to taxable years beginning after December 31, 2024.

According to the Bipartisan Policy Center, the enhanced adoption tax credit is projected to cost $2 billion over 10 years. When evaluating nine major provisions that directly impact working families and children, such as enhancements to the child tax credit, the tax cuts would total $2.1 trillion, and the tax offsets total about $2 trillion.

By enhancing the adoption tax credit and making up to $5,000 refundable, that’s some money that could return to your wallet.

Adoption doesn’t have to be expensive

There are some misconceptions when it comes to expenses associated with the adoption process, and it can be daunting to some families.

In addition to the federal adoption tax credit, some states offer assistance programs for adopted children through the foster care system, such as monthly cash payments, reimbursement for adoption expenses, and medical assistance.

Before starting your adoption journey, look at your state’s available programs or speak with a trusted agency to find out if assistance services are available.

As mentioned, Trump's megabill enhanced the adoption tax credit and made it partially refundable. That, and other major provisions to family tax breaks, could help offset some of the costs tied to the process of growing your family, so stay tuned.

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Gabriella Cruz-Martínez is a seasoned finance journalist with 8 years of experience covering consumer debt, economic policy, and tax. Before joining Kiplinger as a tax writer, her in-depth reporting and analysis were featured in Yahoo Finance. She contributed to national dialogues on fiscal responsibility, market trends and economic reforms involving family tax credits, housing accessibility, banking regulations, student loan debt, and inflation.

Gabriella’s work has also appeared in Money Magazine, The Hyde Park Herald, and the Journal Gazette & Times-Courier. As a reporter and journalist, she enjoys writing stories that empower people from diverse backgrounds about their finances no matter their stage in life.