A money windfall for growing families
Adoption is one of life’s greatest joys, but it’s also one that carries a steep price tag — from lawyer costs to travel expenses. Fortunately for families, the federal government lends some relief through the adoption tax credit, which offsets many of the expenses.
Now, there’s more good news for adoptive families. The IRS increased the adoption tax credit in 2026 to $17,670 from $17,280 in 2025. What it means is that families will be able to claim more when they file their taxes in 2027 to help them recoup more of what they paid to bring a child home.
What the adoption tax credit includes
The adoption tax credit allows parents to qualify for some of the eligible expenses of adopting a child. They include attorney and court costs, agency costs, and travel, even meals and accommodations out of town for adoption purposes.
The credit can be taken for domestic, foreign, and foster care adoptions, but not for adopting a stepchild or for paying surrogacy arrangements. Parents can claim the credit on IRS Form 8839.
There is also a large benefit to adoptions of “special needs” children, as described by a state’s child welfare agency. If the child qualifies, the parents may take the entire credit amount, even if they had lower expenses.
Income limits and phaseouts
The amount of credit you’re eligible for depends on how much you make. In 2026, the credit begins to phase out for families with a MAGI of over $265,080 and phases out entirely at $305,080 or more.
Families making less than that can take full advantage of the credit, but families in those groups can have a smaller benefit or no benefit at all.
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New refund provisions of Trump’s tax bill
Beginning with tax year 2025, the adoption tax credit has become partially refundable under President Donald Trump’s recently signed “Big Beautiful Bill”.
This change allows families to receive up to $5,000 in refundable credit, even if they owe virtually nothing or little in taxes. Previously, the credit merely could reduce your tax bill — it would not result in a refund if your account was balanced.
The law also makes the credit inflation-indexed, meaning it will increase every year to keep up with rising costs.
What is “special needs”?
For tax purposes, “special needs” never means that a child is disabled. Instead, it refers to the fact that, in the opinion of a state welfare agency, the child is hard to place due to age, background, or sibling group status.
To qualify, the child has to be a U.S. resident or citizen, and the state must determine that they can neither be nor should be sent back to their natural parents and wouldn’t be adoptable except with subsidies.
But the federal adoption tax credit does not apply to international adoptions classified as “special needs”.
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A modest step, but considerate aid
Adoption fees can readily run tens of thousands of dollars, so this tax credit is a critical source of relief. New rules in Trump’s 2025 tax package — specifically the refundable portion — could potentially make adoption more affordable to middle- and lower-income families.
The Bipartisan Policy Center estimates the cost of extending the adoption tax credit to the federal government at about $2 billion over 10 years, but suggests that it could put thousands of kids into adoptive homes.
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