The 2026 adoption credit, its new refundable part, the income phase-out and the carryforward
Updated October 2026
1. Qualified expenses for the child, up to $17,670 (2026), minus any expenses paid with tax-free employer adoption assistance. For a special-needs adoption finalized in the year, use $17,670 whatever you spent. 2. Income limit. If MAGI is over $265,080, multiply by (MAGI − $265,080) ÷ $40,000 and subtract that share. 3. Refundable part: up to $5,120 is refundable. 4. Nonrefundable part: the rest offsets income tax; what your tax cannot absorb carries forward for up to five years.
Worked examples (2026 amounts). $20,000 of expenses at $150,000 MAGI: credit $17,670, of which $5,120 refundable and $12,550 nonrefundable. At $285,080 MAGI the fraction is $20,000 ÷ $40,000 = 0.500, so the credit is $8,835. At $305,080 or more it is zero.
| Item | 2025 | 2026 |
|---|---|---|
| Maximum credit per child | $17,280 | $17,670 |
| Refundable portion | $5,000 | $5,120 |
| Phase-out range (MAGI) | $259,190 to $299,190 | $265,080 to $305,080 |
Public Law 119-21 made part of the credit refundable for tax years beginning after 2024, so families with little or no income tax receive up to $5,000 (2025) or $5,120 (2026) in cash. Carryforwards from earlier years cannot be used to figure the refundable part.
Qualified expenses are reasonable and necessary adoption fees, court costs, attorney fees, travel (including meals and lodging away from home) and similar costs directly related to a legal adoption of a child under 18 or a person unable to care for themselves. Expenses to adopt a spouse’s child do not qualify. MAGI is AGI plus excluded foreign income. Leave the tax field at 0 to estimate tax from MAGI with the 2026 standard deduction, or enter the tax from your return before credits.
| Family (2026, joint) | Credit | Refundable | Used against tax | Carried forward |
|---|---|---|---|---|
| Domestic adoption, $20,000 of expenses, joint MAGI $150,000 | $17,670 | $5,120 | $12,550 | $0 |
| Special-needs adoption, $0 of expenses, joint MAGI $90,000 | $17,670 | $5,120 | $6,440 | $6,110 |
| Joint MAGI $285,080 (halfway through the phase-out) | $8,835 | $5,120 | $3,715 | $0 |
| Joint MAGI $60,000, $25,000 of expenses (little tax to offset) | $17,670 | $5,120 | $2,840 | $9,710 |
| $30,000 of expenses, $10,000 paid by employer assistance, MAGI $120,000 | $17,670 | $5,120 | $10,040 | $2,510 |
The family at $60,000 owes only $2,840 of tax: the refundable $5,120 comes back as a refund, $2,840 offsets their tax, and $9,710 carries into later years. Before 2025 the whole credit would have been carried forward.
Domestic adoptions: expenses paid in a year before the adoption is final are claimed the following year; expenses in the year it becomes final (or later) are claimed that year. A failed domestic adoption can still qualify. Foreign adoptions: nothing is claimed until the adoption is final. Special needs: a U.S. child whom the state has determined has special needs earns the full credit in the year the adoption is final, even with no expenses. The $17,670 limit is per child across all years, not per year.
Employers can pay or reimburse up to $17,670 of adoption expenses tax-free for 2026 (same limit and phase-out). You can use both benefits for the same adoption, but not for the same dollars: expenses reimbursed tax-free by the employer cannot also earn the credit.
It handles one child and one year. It does not track amounts claimed for the same child in earlier years, apply the ordering of other nonrefundable credits, or settle the timing rules for expenses spread over several years. Keep the adoption decree, agency and attorney invoices and travel receipts; the IRS often asks for them. For an international adoption, a failed adoption, or carryforwards from earlier years, use Form 8839 with its instructions or ask a tax professional.
Claiming domestic expenses too early. Expenses before finalization move to the next year. Claiming foreign expenses before the adoption is final. Double counting employer reimbursements. Forgetting the carryforward in later years’ returns. Missing the special-needs rule, which allows the full credit with no expenses.