Adoption Tax Credit 2025 — How Families Can Save on Adoption Costs

Adoption is one of the most rewarding experiences a family can have—but it can also be one of the most expensive. The IRS helps offset some of those costs through the Adoption Tax Credit, a benefit designed to make adoption more financially accessible.

For 2025, the credit has been adjusted for inflation, and knowing how it works can save families thousands of dollars. Here’s what you need to know.

What Changed in 2025

• The maximum credit is $16,850 per child (up from $16,810 in 2024).

• The credit begins to phase out for taxpayers with Modified Adjusted Gross Income (MAGI) above $252,150 and phases out completely at $292,150.

• The credit is non-refundable, meaning it can reduce your tax liability to zero but won’t create a refund if your tax bill is already wiped out.

Source: IRS Adoption Credit FAQ

How the Adoption Tax Credit Works

• Qualified Expenses:

  • Adoption fees

  • Court costs & attorney fees

  • Travel expenses related to adoption

  • Other directly related expenses

• When You Claim It:

  • For domestic adoptions, expenses can be claimed in the year after they’re paid—even if the adoption isn’t final.

  • For international adoptions, expenses can only be claimed in the year the adoption is finalized.

• Special Needs Adoptions:

  • Families adopting a child with special needs may qualify for the full credit amount regardless of actual expenses paid.

Why It Matters

• High adoption costs: Average U.S. adoption expenses can range from $15,000–$40,000.

• Dollar-for-dollar savings: This is a tax credit, not a deduction, meaning it directly reduces your tax owed.

• Multi-year benefit: If your tax bill isn’t large enough to use the full credit in 2025, you can carry forward unused amounts for up to five years.

Smart Planning Tips for 2025

1. Keep every receipt: Adoption is emotional, but documentation is critical for IRS purposes.

2. Know the phaseout range: If your income is near $252,150, strategic planning can help you qualify for more of the credit.

3. Use with employer benefits: Many employers offer adoption assistance programs—coordinate these with the credit (though the same expenses can’t be double-counted).

4. Plan carryovers: If you don’t use the full credit in 2025, track carryover amounts for the next five years.

5. Consider state credits: Some states offer their own adoption-related tax breaks.

Adoption is a journey of love—and it’s also a financial investment. The Adoption Tax Credit 2025 is one way to ease the costs and support families opening their hearts and homes.

Want help planning for the credit, coordinating with employer assistance, or making sure your adoption expenses are tracked correctly?

Join our 2025 Tax Season Waitlist today: tbtxsolutions.com/join

• ❓ Frequently Asked Questions About the Adoption Tax Credit 2025

  1. How much is the credit in 2025?
  Up to $16,850 per child.

  2. Is it refundable?
  No—it’s non-refundable, but you can carry forward unused credits for up to five years.

  3. What counts as qualified expenses?
  Court costs, legal fees, adoption agency fees, travel, and other necessary expenses.

  4. Do I need finalized adoption papers to claim it?
  For domestic adoptions, no—you can claim expenses the year after payment even if not finalized. For international adoptions, yes—only once finalized.

  5. What if I adopt a child with special needs?
  You may qualify for the full credit amount regardless of your actual expenses.