Adoption Tax Credit 2025
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After adopting a child, you may be eligible to claim the Adoption Tax Credit on your 2025 tax return.
In IRS guidance adjusting for inflation, the Adoption Tax Credit amounts for 2025 have been updated. The maximum amount allowed for 2025 is $17,280 per child. The tax credit begins to phase out for families with modified adjusted gross income greater than $259,190 and is completely phased out for families with modified adjusted gross income of $299,190 or more. When filing your taxes in 2026, you will be working with the income you earned in 2025.
The Adoption Tax Credit applies to domestic, international, and foster care adoptions. However, the credit does not apply to surrogate parenting or stepparent adoption. For 2025, the Adoption Tax Credit is partially refundable, meaning up to $5,000 of the credit may be refundable even if you do not owe that much in federal income tax. Any remaining nonrefundable portion of the credit can be carried forward and claimed on future tax returns for up to five years. The amount of the credit that is claimable by adoptive parents is the amount spent on adoption-related expenses, up to the annual limit. An exception to this applies in the adoption of a child with special needs, in which case the entire credit may be claimed regardless of the amount of expenses incurred.
For domestic adoptions that are not yet finalized, you may claim qualifying expenses for the credit in the year following the year the expense is paid. This means you can claim the adoption tax credit for expenses paid even if a domestic adoption is never finalized. Expenses paid in the year an adoption is finalized can be claimed on that year’s tax return. Expenses paid after an adoption is finalized can be claimed in the year the payment is made.
Qualified adoption expenses include travel expenses, meals, lodging, court costs, attorney fees, and other expenses directly related to the purpose of adoption. The credit is scalable with more than one child, meaning it doubles with two children, triples with three, and so on. The Adoption Tax Credit is a credit, not a deduction. That means if you spend $14,000 on adoption and are assessed $15,000 in federal tax, your tax liability would be reduced to $1,000. This differs from a deduction, which reduces taxable income rather than taxes owed.
Some states offer additional adoption-related tax benefits that may be used in conjunction with the federal Adoption Tax Credit. Wisconsin, for example, provides an additional state tax deduction (not a credit) for parents of newly adopted children.
For more information on the Adoption Tax Credit, the National Council for Adoption is a helpful resource. You can also learn more on the IRS Adoption Credit page and check your eligibility using this interactive tool.
Adoptions of Wisconsin does not provide tax advice or guidance. Please consult a qualified tax professional for information specific to your situation.
