Understanding the Adoption Tax Credit in 2025
Adoption can be one of the most fulfilling and life-changing decisions a family makes. But it’s no secret that adoption often comes with significant financial considerations. The Adoption Tax Credit (ATC) exists to help alleviate some of those costs and make adoption more attainable for more families.
Each year, thousands of families across the country use the Adoption Tax Credit to help offset expenses associated with building or growing their families. In 2025, there are some important details prospective and current adoptive parents should understand about how the credit works.
The National Council For Adoption (NCFA) is a great resource for information on the tax credit and is current as of March 2025. However, every family’s tax situation is different, and you should always consult a qualified tax professional to evaluate your personal eligibility.
What Is the Adoption Tax Credit?
The Adoption Tax Credit is a federal nonrefundable tax credit available to adoptive parents to help reduce their federal income tax burden. For adoptions finalized in 2024, the maximum credit families can claim on 2025 tax returns is $16,810 per child who was adopted. For adoptions finalized in 2025, the credit increases to $17,280, reflecting the annual inflation adjustment.
This credit applies on a per child basis and is designed to help families offset the high costs associated with adoption—including court fees, travel, attorney fees, and other qualifying expenses.
Unlike a deduction, which reduces your taxable income, a tax credit directly reduces the amount of tax you owe—which can result in significant savings if you’re eligible.
How Does It Work?
The Adoption Tax Credit is nonrefundable, meaning it can only reduce your federal income tax liability to zero. If your tax liability is less than the full amount of the credit, you may carry forward any unused portion of the credit for up to five years.
For example, if your federal tax liability in a given year is $10,000 and you qualify for the full credit of $16,810, the tax credit would cover that liability completely, and you could carry forward the remaining $6,810 to apply in future years.
To claim the credit, you must file IRS Form 8839 with your federal tax return and provide documentation including:
- Final Judgment of Adoption
- Receipts for qualifying expenses
- Home study or placement agreements
- Subsidy agreement (for foster care adoptions involving children with special needs)
If your adopted child does not yet have a Social Security number, you may apply for and use an
Adoption Taxpayer Identification Number (ATIN) when filing.
Who Is Eligible?
According to the NCFA’s 2025 Adoption Tax Credit Guide, you may be eligible for the ATC if:
- You adopted a child who is not your spouse’s biological child
- You paid out-of-pocket qualifying adoption expenses
- You adopted a child from foster care with a special needs determination by the state
If a child is declared special needs through a state foster care system, you may qualify for the full credit even without any expenses—as long as you can provide an official signed and dated subsidy agreement or eligibility determination document.
Intercountry adoptions do not automatically qualify for the full credit unless you can document eligible expenses. Special needs declarations do not apply to international adoptions under IRS rules.
Income Limits in 2025
Eligibility for the credit also depends on your modified adjusted gross income (MAGI). For the 2024 tax year (filed in 2025):
- Families earning $252,150 or less qualify for the full credit.
- Families earning between $252,151 and $292,150 qualify for a partial credit.
- Families with MAGI over $292,150 are not eligible for the credit.
These income thresholds are adjusted for inflation annually, so they may change each year.
What Expenses Qualify?
The IRS allows you to claim the ATC for a wide range of necessary and reasonable adoption expenses, including:
- Legal fees
- Court costs
- Adoption agency fees
- Travel and lodging related to the adoption
- Re-adoption expenses in intercountry adoptions
- Required documentation and dossier preparation
Expenses that do not qualify include:
- Birth parent living expenses
- Temporary foster care costs (clothing, food, furnishings)
- Any expenses reimbursed by your employer or covered by grants (if claimed as part of the exclusion)
For foster care adoptions of children declared special needs, expenses do not need to be documented to claim the full credit.
Special Situations
Here are a few common scenarios clarified by NCFA’s 2025 ATC FAQ:
- Multiple Adoptions: The credit applies per child, not per family. If you adopt two children, you may be eligible for up to double the maximum credit.
- Failed or Disrupted Domestic Adoptions: You may still claim qualified expenses in the year after you incur them, even if the adoption does not finalize.
- Readoption of a Previously Adopted Child: If a child is re-adopted, the new adoptive family can claim the ATC, but should be prepared to submit additional documentation to the IRS.
- Carryforward Limits: If you did not qualify in the year your adoption was finalized due to income limits, you cannot claim the credit in later years. Carryforward only applies if you were eligible in the year of finalization.
Why Isn’t the Credit Refundable?
As of 2025, the Adoption Tax Credit remains nonrefundable, which means families with low or no tax liability may not be able to use the full amount.
For example, self-employed individuals—whose income is subject to SECA taxes—may not see the full benefit because the ATC only applies to ordinary income tax liability. Families may find themselves unable to claim the full credit in the first year, despite significant adoption-related costs. Instead, they carry the unused portion forward, hoping to use it in future tax years.
NCFA continues to advocate for a refundable Adoption Tax Credit, which would allow families of all income levels to access the full benefit, regardless of federal tax liability. The organization encourages families to share their stories with lawmakers to support ongoing legislation like the Adoption Tax Credit Refundability Act.
Other Financial Support
The ATC is only one piece of the financial puzzle. NCFA recommends that families also explore:
- State-level tax credits or subsidies
- Employer adoption benefits
- Adoption grants and loans from organizations like Show Hope, HelpUsAdopt.org, and Brittany’s Hope
- Military adoption reimbursements, which provide up to $2,000 per child for qualifying expenses
A complete list of options is available through NCFA’s Adoption Financial Resources page.
The Adoption Tax Credit can be an invaluable financial tool for families who open their hearts and homes to a child through adoption. While navigating tax paperwork can feel daunting, understanding the basics—and working with a qualified tax professional—can help ensure that you receive the support you’re entitled to.
Stay informed through trusted resources like the National Council For Adoption, and don’t hesitate to ask your agency, attorney, or financial advisor for help. Your family’s adoption journey deserves all the support available.
This article is intended for general educational purposes only and does not constitute legal or tax advice. Every family’s financial and tax situation is different. Readers should consult with a qualified tax professional or financial advisor to evaluate their individual eligibility for the Adoption Tax Credit or other adoption-related benefits. Adoption.com and its contributors are not responsible for any decisions made based on this content.
