Families Adopting a Child in 2027 Can Claim a Credit of Up to $18,250, and $5,280 of It Is Now Refundable

For a family adopting a child, the dollar amount of the federal adoption credit is only half the question. The other half is the calendar: the year a family may claim it depends on whether the adoption is domestic or foreign, finished or still in progress. The IRS has now set the maximum for 2027 at $18,250, up from $17,670, and $5,280 of it can come back as a refund.

Those figures are in the agency’s Nov. 5, 2026 inflation release, IR-2026-133, and in Revenue Procedure 2026-35. The release says the adjustments generally apply to tax returns filed in 2028, so a family claiming the 2027 amounts would do so on a return filed after the new year, not on this winter’s return.

The $18,250 limit and the $5,280 refundable slice

The IRS describes the $18,250 as a cap on qualified adoption expenses per child. A family’s credit equals the qualified expenses it actually paid, up to the cap, and the same dollar limit applies to the exclusion for employer-provided adoption benefits. The revenue procedure lists $18,250 for both a child with special needs and other adoptions.

The refundable portion is $5,280 for 2027. The IRS adoption credit page lists the current-year figures as $17,670 and up to $5,120 refundable per child, and says claiming the refundable part requires Schedule 3-A. The 2027 refundable amount is therefore $160 above the current one.

Who the income test removes

The credit shrinks at higher incomes. For 2027, according to the revenue procedure, the phase-out starts at modified adjusted gross income of $273,680 and the credit is fully phased out at $313,680. The IRS page shows the current-year range as full credit at $265,080 or less, a reduced credit from $265,081 to $305,079 and no credit at $305,080 or more.

Set side by side, the changes are modest. The cap rises $580, from $17,670 to $18,250. The refundable portion rises $160, from $5,120 to $5,280. The income band moves up $8,600 at both ends, with the start of the phase-out going from $265,080 to $273,680 and the end from $305,080 to $313,680, per the two IRS sources.

The child must be under 18 or physically or mentally incapable of self-care, the IRS says. Married taxpayers generally must file jointly, with an exception for certain married people filing separately. Registered domestic partners may qualify in states that allow second-parent adoption, though not for adopting a spouse’s child.

When a family claims it

The IRS spells out four timing rules. A domestic adoption that has been finalized is claimed in each year the expenses are incurred or paid. A domestic adoption still in progress is claimed in the year after the expenses are incurred or paid. A foreign adoption is claimed in the year it becomes final, with all eligible expenses included, including those from earlier years. A special needs adoption is claimed in the year it becomes final, even if the family had no expenses.

That last rule is the reason the 2027 number matters to families with special needs adoptions. The IRS says a state or tribal government must determine that the child has special needs, and that the child must be a U.S. citizen or resident. In that case the full credit applies even with no qualifying expenses. Acceptable documentation includes an adoption assistance agreement, a welfare agency certification or an official letter on government letterhead. With a written employer adoption assistance program, the full exclusion applies even if the employer paid nothing.

Expenses that count, and ones that do not

Qualified expenses include adoption and attorney fees, court costs, and travel, including meals and lodging. Costs tied directly to the legal adoption count too, such as home study fees paid before a child is identified. Expenses for a spouse’s child, surrogacy arrangements, expenses used for another credit or deduction, expenses paid by a government program, expenses reimbursed by an employer and expenses that violate the law do not qualify.

The cap applies per child, not per calendar year, the IRS says, so a family that spends on one adoption across several years is working against a single $18,250 limit for that child. A family adopting two children has a separate limit for each, and the IRS tells families to subtract any credit already claimed for the same child in earlier years.

A family cannot claim the credit and the employer exclusion for the same expenses. The IRS says to complete the exclusion first, in Part III of Form 8839, then the credit in Part II. Children are listed by Social Security number, adoption taxpayer identification number or individual taxpayer identification number, and an ATIN is requested on Form W-7A for pending adoptions.

Leftover credit and the carryforward

The 2025 tax law, Public Law 119-21, lists a section titled “Enhancement of adoption credit” in its table of contents, and the IRS’s adoption credit topic page carries the current rules on expenses, timing and carryforwards.

Any part of the nonrefundable credit that a family cannot use in a year can be carried forward for up to five years, after which the remainder is forfeited, the IRS says. For tax year 2025 only, unused carryforwards from 2020 through 2024 may be refundable up to $5,000 per eligible child, with most refunds expected to be issued automatically by Dec. 31, 2026. The site covered that automatic refund rollout earlier.

The IRS recommends keeping all adoption records, and a family that filed an incorrect claim can correct it on Form 1040-X, which takes 8 to 12 weeks to process. If the agency rejects or reduces a claim, the family can appeal through the Independent Office of Appeals.

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This article was produced with AI assistance and edited for accuracy against the sources linked above.

Image: Dave Fischer – CC BY-SA 2.0/Wikimedia Commons