Contributed by: AndyS, FreeTaxUSA Agent, Tax Pro
Adoption can be an exciting and meaningful way to grow your family, but it can also come with significant expenses. The adoption credit may help offset some of these costs by giving eligible taxpayers a dollar-for-dollar credit for qualified adoption expenses.
For 2026, you may be able to claim up to $17,670 for each eligible child. In this article, we’ll explain how the credit works, which expenses qualify, and when you may claim it.
How does the adoption credit work?
The maximum credit amount for 2026 is $17,670 for each eligible child. The credit includes a refundable and nonrefundable portion. On Form 8839, Qualified Adoption Expense, the refundable portion is calculated before the nonrefundable portion. The nonrefundable portion can reduce the tax you owe, but it generally doesn’t create or increase your refund itself. The refundable portion may increase your refund, even if you don’t owe tax. Up to $5,120 of the credit is refundable, and the remaining $12,550 is nonrefundable.
The refundable portion can increase your tax refund, even if you don’t owe tax. If your tax liability is low or zero, you may be able to carry the nonrefundable portion forward for up to five years. This may help lower your tax bill in the future.
In addition, there are some income limits associated with claiming the adoption credit. In 2026, your modified adjusted gross income (MAGI) must be $265,080 or less to claim the full credit. If your MAGI is between $265,081 and $305,079, you may qualify for a reduced credit. Once your MAGI reaches $305,080, the credit is fully phased out.
Let’s look at a couple of examples.
Examples
Example 1: The Garcia family adopted a child in 2026 and paid $22,000 in qualifying adoption expenses. Their MAGI for 2026 was $125,000. Because the credit is capped at $17,670, they qualify for the maximum amount. This includes a $5,120 refundable credit and $12,550 nonrefundable credit. Their tax liability for 2026 is $11,000.
First, the nonrefundable portion is applied:
- $12,550 nonrefundable credit - $11,000 tax liability = $1,550 nonrefundable credit left over.
The nonrefundable portion has eliminated the $11,000 tax liability on their 2026 return. Since the Garcia family couldn’t use the full $12,550 nonrefundable credit, they may be able to use the remaining $1,550 as a carryforward credit on their tax return next year.
Second, the refundable portion is applied:
- Since their tax liability was reduced to $0, they’re able to claim the full $5,120 refundable credit as a tax refund.
Bottom line: The Garcias don’t owe tax for 2026, and their tax refund includes $5,120 from the refundable portion of the credit. They can also carry $1,550 of the nonrefundable portion forward up to 5 additional years for use on a future tax return. After that, any unused portion is lost.
Example 2: The Johnson family adopted a child in 2026 and paid $15,000 in qualified adoption expenses. Their MAGI is $65,000, so they’re eligible for the full $15,000 adoption credit. Their tax liability for 2026 is zero.
Because the Johnsons don’t owe any tax for 2026, they can’t use the nonrefundable portion of the credit that year. However, they may still be able to claim up to $5,120 of the refundable portion as part of their refund. The remaining $9,880 is nonrefundable and may be carried forward to a future tax year.
Bottom line: The Johnsons may receive the refundable portion for 2026 and may be able to carry the remaining $9,880 forward for up to five years. If they don’t use the full carryforward during that period, the unused amount expires.
What are qualifying expenses for the adoption credit?
Now that you know how the credit works, let’s look at which expenses may qualify and which ones don’t.
Qualified adoption expenses should be reasonable and necessary. They must also be directly related to, and for, the principal purpose of the legal adoption. Common qualified expenses include:
- Adoption fees
- Attorney fees
- Court costs
- Travel expenses, including meals and lodging, while away from home
- Expenses paid before you identify an eligible child, such as home study fees
These expenses generally don’t qualify:
- Amounts paid to adopt your spouse’s child
- Costs for a surrogate-parent arrangement
- Expenses you can claim with another federal tax credit or deduction
- Funds received from a federal, state, or local program
- Reimbursement by your employer
What if my employer paid or reimbursed adoption expenses?
If your employer paid or reimbursed some of your adoption expenses, you may be able to exclude that assistance from your taxable income. To qualify, the assistance generally must be provided through a written qualified adoption assistance program.
For 2026, up to $17,670 of employer-provided adoption benefits may be excluded from income. You’ll usually see these benefits on your W-2 in Box 12 with code T. If your employer paid more than the amount you're allowed to exclude, the extra amount may be taxable.
You can’t use the same adoption expenses for both the employer-provided benefits exclusion and the adoption credit. However, if you paid additional qualified expenses out of pocket, you may be able to use those expenses to claim the credit.
The exclusion and the credit each have their own annual limit. This means you may be able to receive both tax benefits in the same year, as long as you have enough qualified expenses to support both. See the IRS Form 8839 instructions for more information on employer-provided adoption benefits.
Example 3: Sarah adopted a child in 2026 and incurred total qualified adoption expenses of $36,000. Her employer reimbursed $17,670 through a qualified adoption assistance program.
- Exclusion: Sarah can exclude the $17,670 employer reimbursement amount from her taxable income.
- Remaining qualified expenses: $36,000 − $17,670 = $18,330
- Adoption credit limitation: Sarah has $18,330 of qualified expenses that weren't reimbursed by her employer. However, because the adoption credit is limited to $17,670, she can use only $17,670 of those expenses to claim the credit.
- Unused expenses: The remaining $660 ($36,000 − $17,670 − $17,670) can't be claimed as a credit or excluded from income.
Bottom Line: Sarah gets a combined tax benefit of $35,340 ($17,670 exclusion + $17,670 credit), but $660 of her expenses provide no tax benefit.
Are things different if I adopted a child with special needs?
Yes. There are a few special rules for adoptions involving a child who meets the IRS definition of special needs. In this context, special needs is a specific IRS/legal designation for tax purposes. It doesn’t necessarily mean the child has a disability. A child may qualify if a state or tribal government determines that the child is unlikely to be adopted without assistance.
To meet the IRS definition, both of the following conditions must apply:
- The child is a U.S. citizen or resident; and
- A state or tribal government has determined the child can’t or shouldn’t be returned to the parent’s home and is unlikely to be adopted without adoption assistance.
You’ll also need documentation from the state or tribal government showing the child meets the IRS definition of special needs. This documentation may include:
- An adoption assistance agreement or subsidy issued by the state or tribal government or court.
- Certification from a state, tribal, or local welfare agency showing the child is approved to receive adoption assistance.
- Certification from a state, tribal, or local welfare agency confirming the child’s special needs status.
- An official letter on state, tribal, or county government letterhead confirming the child’s special needs status.
If the adoption qualifies, you may be able to claim the full adoption credit even if you didn’t pay any qualified adoption expenses. You may alternatively be able to use the full income exclusion if your employer offers a written qualified adoption assistance program, even if your employer didn’t assist with paying adoption expenses.
When should I claim the credit?
The year you can claim the adoption credit depends on the type of adoption and whether the adoption has been finalized. Here’s a simple breakdown:
U.S. adoption: If the adoption is finalized, you can generally claim qualifying expenses in the year you paid them. If the adoption is still in progress, you usually claim the expenses the year after you paid them. If the adoption doesn’t become final, you may still be able to claim the credit if the child is a U.S. citizen or resident. Be sure to keep documentation with your tax records.
Foreign adoption: You can claim qualifying expenses once the adoption is finalized. This includes eligible expenses you paid in earlier years while the adoption was in progress.
Adoption of a child with special needs: You can claim the credit in the year the adoption is finalized, even if you didn’t pay any qualified adoption expenses.
How do I claim the adoption credit?
To claim the adoption credit, you should typically complete Form 8839, Qualified Adoption Expenses, and submit it with your federal tax return. Keep receipts, adoption agreements, court documents, and other supporting records with your tax files.
How do I enter adoption expenses in FreeTaxUSA?
Follow these steps to enter your adoption expenses in your FreeTaxUSA account:
- Follow menu path: Deductions/Credits > Other Deductions/Credits > Adoption Expenses.
- Click +Add an Adopted Child.
- Select Save and Continue.
- Enter the eligible child’s information and click Save and Continue.
- Enter your qualified expenses, then select Save and Continue.
Final thoughts
The adoption credit can help offset some of the costs of growing your family through adoption. Keep in mind that the rules can vary depending on your income, type of adoption, when you pay the expenses, and whether your employer provides adoption benefits.
If you qualify, the credit may reduce your tax bill on your current year return or help lower your taxes in a future year if you carry forward part of the nonrefundable portion. Keeping clear records as you go can make it easier to claim the credit when you’re ready to file.