IRS Begins Automatic Adoption Credit Refunds to More Than 50,000 Taxpayers

The IRS has started issuing refunds to more than 50,000 taxpayers who claimed the adoption tax credit in tax year 2025 and have unused credits from previous years.

Individuals who adopt children can receive a tax credit for expenses incurred during the adoption process, such as adoption fees, attorney fees, travel expenses, and court costs.

For 2025, the maximum adoption tax credit is $17,280 per eligible child. Starting in 2025, a portion of the tax credit, up to $5,000 per child, is refundable. As such, the tax credit now contains a refundable and a nonrefundable portion. The unused nonrefundable portion of the tax credits of any year can be carried forward for up to five years.

When calculating the refundable portion for a specific year, any nonrefundable credit carried forward from previous years cannot be used in that calculation. However, an exception exists for the 2025 tax year—for this year only, prior-year nonrefundable tax credits from 2020–2024 can be used to determine the refundable portion of the tax credit.

The refund process for more than 50,000 taxpayers with tax credit carryforwards applicable to tax year 2025 is expected to be completed by the end of 2026, the IRS said in an Oct. 16 statement.

Taxpayers who filed their 2025 return before April 15, 2026, will generally receive any refunds or other tax adjustments automatically.

Taxpayers who filed returns after the deadline under an extension, or those with accounts facing identity theft concerns, freezes, and other issues, will be reviewed later this year, the IRS said.

The IRS will adjust the taxpayer’s account and issue refunds without the individual having to file an amended return to receive the credits. Taxpayers will be notified about whether the adjustment resulted in a refund or was applied to another tax or non-tax debt. Taxpayers will receive these notices generally within 30 days of adjustment.

“By issuing refunds without requiring eligible families to file an amended return, the IRS is helping reduce the financial burden on those who decided to adopt a child into their family,” IRS Chief Executive Officer Frank J. Bisignano said in the statement.

“This administrative change will help families access the tax benefits they are entitled to as quickly and simply as possible.”

Refunds and tax adjustments began late last month and will continue until the process is completed, the IRS said.

To be eligible for full credit for 2025, a taxpayer’s modified adjusted gross income must be $259,190 or less. For incomes between $259,191 and $299,189, the credits will be reduced. For incomes at or above $299,190, the credit is unavailable.

Only a child under the age of 18 or a child who is physically or mentally incapable of self-care can qualify for the tax credits.

Expenses that do not qualify for the credit include an adoption for the spouse’s child and expenses incurred to arrange a surrogate parent.

“The credit amount applies to the adoption of each child individually, not each calendar year. If you claim expenses in more than one year for the same adoption (final or in progress), you must subtract past credit amounts you claimed from your remaining credit,” the IRS clarified.

For instance, a person who began the adoption process in 2023 and incurred $3,000 in expenses may claim $3,000 in adoption credits in 2024. If the adoption is finalized in 2025 and the person paid $17,280 in additional expenses related to the process, the taxpayer must deduct $3,000 from $17,280 and can claim only $14,280 in credits, since the maximum credit per child is $17,280.