In her latest article, KingSpry’s Adoption and ART Practice Chair and Family Law Attorney, Dorota Gasienica-Kozak, Esq., reviews the authorities governing the Adoption Tax Credit and related programs and discusses recent developments affecting tax year 2025.
Article Highlights
- Under the Internal Revenue Code, the maximum Adoption Tax Credit is $17,280 per child for 2025.
- The “One Big Beautiful Bill Act” made the Adoption Tax Credit partially refundable, allowing taxpayers to receive up to $5,000 per child.
- Both State and Indian tribal governments are authorized to make the determination as to whether a child is a “child with special needs” for purposes of the Adoption Tax Credit.
The Adoption Tax Credit and Assistance Programs
The Internal Revenue Code, 26 U.S. Code § 23, allows for an adoption tax credit for qualified adoption expenses paid or incurred by eligible taxpayers. Since 2024, the following authorities have updated the Adoption Tax Credit and Assistance Programs:
1. IRS Revenue Procedure
On October 22, 2024, the Internal Revenue Service (“IRS”) issued Revenue Procedure 2024-40, which announced updated figures for the Adoption Tax Credit and Adoption Assistance Programs taking effect in 2025.
Section 2.04 increased the tax credit for the adoption of a child with special needs to $17,280 (previously $16,810). It also increased the maximum tax credit allowed for other adoptions to $17,280 (previously $16,810).
2. “One Big Beautiful Bill Act“
On July 4, 2025, the “One Big Beautiful Bill Act” was signed into law and updated the Adoption Tax Credit.
The Act made the Adoption Tax Credit partially refundable, allowing taxpayers to receive up to $5,000 as a refundable credit for 2025. The nonrefundable credit may be carried forward for five (5) years. The refundable portion, however, cannot be carried forward.
The Act also clarified that both State and Indian tribal governments may determine whether a child qualifies as having “special needs” for purposes of the Adoption Tax Credit. Previously, only State governments were authorized to do so.
3. IRS FAQ
In February 2026, the IRS issued an FAQ, addressing various questions related to the refundability of the Adoption Tax Credit and special needs determinations made by Indian tribal governments.
The IRS clarified that adoptive parents may claim and benefit from the Adoption Tax Credit for multiple adoptions. For tax year 2025, adoptive parents may claim up to $17,280 per eligible child, with up to $5,000 potentially being refundable.
The IRS also confirmed that, beginning January 1, 2025, determinations made by Indian tribal governments regarding whether a child has “special needs” are recognized for purposes of the Adoption Tax Credit. This provision applies retroactively to include decisions made by Indian tribal governments prior to the enactment of the One Big Beautiful Bill Act on July 4, 2025.
Key Takeaways for Adoptive Families
Families pursuing adoption are encouraged to track and retain their adoption-related expenses, including adoption fees, court costs, attorneys fees, and other expenses related to the adoption of their child(ren). Careful documentation will help support a claim for the Adoption Tax Credit and refund.
Adoptive parents should also consider consulting with tax experts and legal advisors to ensure they properly claim and maximize the tax incentives offered to them.
If you have questions regarding adoption, KingSpry’s ART Law Group Chair, Dorota Gasienica-Kozak, Esq., is prepared to assist you. Gasienica-Kozak is a fellow of the Academy of Adoption and Assisted Reproduction Attorneys (AAAA), a member of the American Society of Reproductive Medicine (ASRM), a member of SEEDS, a promoter for RESOLVE: The National Infertility Association, and a committee member of the American Bar Association’s Family and ART Law sections.
