Adoption Tax Credit 2025

Two tax benefits are available to adoptive parents: the adoption credit and the adoption benefits exclusion. Both are beneficial tax breaks for adoptive families, and the rules have recently changed. Let’s walk through the details.

Adoption credit

If you paid adoption expenses in 2025, you now qualify for a credit of up to $17,280 per child (In 2024, the credit amount was $16,810 for each adopted child.)

The credit amount depends on your income and may be phased out at higher income levels

For 2025, if your Adjusted Gross Income (AGI) is:

• $259,190 or less, you’re eligible for the full adoption credit.
• More than $259,190, then your credit will be reduced (phased out).
• Above $299,190, you can’t claim the credit.

The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, significantly enhanced the Adoption Tax Credit that benefits adoptive families starting with the 2025 tax year. The change is one part of the OBBBA tax reform for families.

The OBBBA made the Adoption Credit partially refundable. This means that families can receive a portion, up to $5,000 of the credit, even if they don’t owe federal income tax.

Any nonrefundable portion of the credit can be carried forward to the next tax year. And, after 2025, the refundable portion of the credit will be indexed for inflation.

Adoption benefits exclusion

If your employer offers an adoption assistance program, you can exclude up to $17,280 from your income from your tax return. This limit adjusts annually for inflation. The income limits apply to this tax benefit, too.

Your employer will report these benefits on Form W-2, Box 12, and mark it with the code “T”.

Combining the Adoption Tax Credit and Adoption Income Exclusion

You can claim both the credit and the exclusion for expenses related to adopting a child. However, you can’t claim both for the same expenses. So, if you take the Adoption Exclusion, you need to use the funds first. Any remaining out-of-pocket expenses are eligible for the Adoption Tax Credit.

Exceptions are available for those who adopt special needs children.

Special needs exclusion

If you adopt a special needs child, you’re allowed the maximum credit ($17,280 for 2025) and/or exclusion even if there are no qualified expenses.

The MFS restrictions apply to special needs adoptions. (See below for claiming the credit as a MFS filer.)

Special needs determination: While the criteria are federally guided, the actual determination is made by the state agency or Indian Tribal Government handling the adoption case.

Adoption tax benefit exceptions (for MFS)

If you’re filing separately from your spouse, you can claim the credit only if you meet these specific conditions:

• You lived apart for six months of the year.
• Your adopted child lives with you for more than half the year.
• You pay more than half the cost of keeping up your home. 

The income limitation above still applies to MFS filers.

Qualifying adoption expenses

Qualifying expenses include:

• Adoption fees
• Court costs
• Attorneys’ fees
• Travel expenses
• Other adoption costs

For your expenses to qualify for the credit or exclusion, both of these must apply:

• The adopted child must be under age 18 or disabled.
• You paid the expenses.

Year you claim the credit or exclusion

If the adopted child is a U.S. citizen or resident, the year you claim the credit or exclusion will depend on:

• The year you pay the expenses
• When the adoption becomes final

You must consider the year you pay the expenses and the finality of the adoption. Follow these rules to claim the credit or exclusion:

• If you pay the expenses in a year before the adoption becomes final, you can claim the credit in the year after the year of payment.
• If you pay the expenses in the year the adoption becomes final, you can claim the credit for that year.
• If you pay the expenses in a year after the adoption becomes final, you can claim the credit in the year you pay the expenses.

If the adopted child has special needs, you can claim the full amount of the credit and the exclusion. You can do this regardless of the actual amount of expenses incurred.

If the adopted child is from a foreign country, you might be able to claim the credit and / or exclusion. You can do so only if the adoption became final.

How to claim the Adoption Tax Credit or exclusion

To report your adoption expenses and claim the adoption credit or exclusion:

• Use Form 8839: Qualified Adoption Expenses.
• Attach the appropriate records to the form.

The documentation will help you in case you need to refer to your records at a later date.

Considerations for the finality of foreign adoptions

The IRS has safe harbors for the finality of foreign adoptions covered by the Hague Convention. They’re for children adopted on or after the Hague Convention took effect. They apply to children who both:

• Were habitually residents in a convention country
• Moved, or will move, to the United States

Prospective adoptive parents must also have filed Form I-800A: Application for Determination of Suitability to Adopt a Child from a Convention Country. The application must be both of these:

• From a Hague Convention country
• Filed with the Department of State on or after April 1, 2008

If you meet all the requirements, you can rely on the safe harbor when you claim the finality of the adoption.

The IRS usually won’t challenge the finality of foreign adoptions finalized in a Hague Convention country other than the United States. This is true in the tax year that either:

• The Hague Convention country enters a final decree of adoption
• The U.S. Secretary of State issues a Hague Adoption Certificate (IHAC)

When a foreign adoption is finalized in the United States, you shouldn’t face an IRS challenge. This is true if the child came to the country for adoption under a Hague Custody Certificate (IHCC). However, this only applies for the year that a state court enters a final decree of adoption.

What tax prep options handle dependent and adoption credits?

H&R Block can help you claim dependent and adoption credits. You can use our easy-to-follow online program, H&R Block Online, to claim these credits yourself, or work with an H&R Block tax pro—virtually or in person—for added guidance. Either way, we’ll help make sure you get the credits you qualify for.

Get help claiming the Adoption Tax Credit

Turn to H&R Block for assistance claiming the Adoption Tax Credit. Whether you choose to file with a tax pro or file with H&R Block Online, you can rest assured that we’ll get you the biggest refund possible.