Changes to the Adoption Tax Credit
August 2025
As you know, title IV-E of the Social Security Act requires title IV-E agencies to inform any individual who is adopting, or whom the agency is made aware is considering adopting, a child in foster care of their potential eligibility for an Adoption Tax Credit under section 23 of the Internal Revenue Code of 1986 (IRS code) (42 U.S.C. 671(a)(33)). We want to bring to your attention recent changes to the tax credit. Section 70402 of Public Law (P.L.) 119-21, enacted on July 4, 2025, made the following changes, beginning with tax year 2025:
- The tax credit is partially refundable, allowing adoptive parents to claim up to $5,000 in refundable Adoption Tax Credit.
- Indian tribal government determinations of whether a child has special needs as required by section 23(c) of the IRS code are now allowable for the purposes of the Adoption Tax Credit.
For more information, updated guidance will be provided by the Internal Revenue Service.
DISCLAIMER: This summary was prepared by the Children's Bureau and should not be used as official guidance on tax law. Adoptive families should contact the IRS or a tax advisor for information on the credit or exclusion.