For many families, the greatest hurdle to bringing a child home isn’t the paperwork or the wait—it’s the financial strain. As we enter 2026, the Internal Revenue Service has delivered a significant piece of news that provides much-needed relief. Following the annual inflation adjustments and provisions from the One, Big, Beautiful Bill (OBBB), the Federal Adoption Tax Credit has seen a substantial increase, reaching a record high for the 2026 tax year.

If you are planning to finalize an adoption this year, understanding these numbers is the first step toward reclaiming a massive portion of your expenses.

The News: A Record-Breaking Inflation Adjustment

The IRS officially announced that for adoptions finalized in 2026, the maximum credit allowed is $17,670 per child. This is a significant jump from the $17,280 limit in 2025.

However, the headline news for 2026 isn’t just the higher cap—it’s the partial refundability. For the first time in over a decade, a portion of the credit is now refundable. This means that even if you do not owe $17,000 in federal income taxes, the government can still issue you a refund check for a portion of the credit to help offset your costs.

  • Maximum Credit: $17,670 (up from $17,280).

  • Refundable Portion: Up to $5,120 of the credit is now refundable in 2026.

  • Carry-Forward: Any remaining non-refundable portion can still be carried forward for up to five years.

Cost of Adoption USA: Why This Matters

With the average cost of adoption in the USA ranging from $25,000 to $60,000 for private domestic adoptions, this tax credit covers nearly 30% to 70% of the total financial burden for many families.

Crucially, families adopting from the U.S. foster care system who are adopting a child with “special needs” (as defined by their state) automatically qualify for the full $17,670 credit, regardless of their actual out-of-pocket expenses. This is a vital provision designed to encourage the adoption of children who might otherwise wait years for a permanent home.

Eligibility and Phase-Out Limits

The 2026 tax credit is designed to support middle-income families. As your income increases, the credit begins to phase out:

  • Full Credit Eligibility: Families with a Modified Adjusted Gross Income (MAGI) of $265,080 or less.

  • Partial Credit: Families with a MAGI between $265,080 and $305,080.

  • Phase-Out: Families earning above $305,080 are generally ineligible for the credit.

Tutorial: How to Claim Your Credit (IRS Form 8839 Guide)

To claim the credit, you must file IRS Form 8839 (Qualified Adoption Expenses) alongside your Form 1040. Here is a quick guide to getting it right:

  1. Categorize Your Expenses: You can claim “reasonable and necessary” expenses, which include attorney fees, agency fees, court costs, and travel expenses (including meals and lodging while away from home).

  2. Verify Timing: For domestic adoptions, you generally claim expenses paid before the year of finalization in the year after payment. Expenses paid in the year of finalization are claimed that same year.

  3. Special Needs Exception: If your child is designated as special needs by the state, skip the expense itemization in Part II of Form 8839 and enter the full $17,670.

  4. Save Your Documentation: The IRS requires strict record-keeping. Ensure you have itemized invoices from your attorney and agency, and keep all travel receipts.

Conclusion

While the 2026 increase to $17,670 offers a brighter financial outlook for adoptive parents, the legal requirements to qualify for “reasonable and necessary” expenses are more scrutinized than ever. Ensuring your adoption is legally sound—from the initial petition to the finalization decree—is the only way to guarantee you can successfully claim the maximum credit and navigate the new refundability rules. One minor clerical error in your legal filings can lead to a rejected claim or a costly IRS audit. To ensure your adoption journey is legally secure and that you are positioned to receive the full financial benefits you are entitled to, contact Lforlaw today to connect with expert adoption attorneys who specialize in the complex intersection of family law and federal tax regulations.

Sources

  • Internal Revenue Service (IRS): Revenue Procedure 2025-32 (Inflation Adjustments for Tax Year 2026).

  • Tax Foundation: 2026 Federal Income Tax Brackets and Rates (Updated Oct 2025).

  • AdoptHelp: How to Afford a Domestic Adoption: 2026 Federal Adoption Tax Credit Guide.

  • Congress.gov: One, Big, Beautiful Bill (OBBB) – Section 704: Adoption Credit Amendments.

  • Parker & Parker Attorneys: 2026 Adoption Tax Credit: Refundability and Carry-Forward Rules.

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