Families who paid to adopt a child but could not fully use the federal tax credit for those expenses are receiving refunds after a Treasury Department interpretation changed how their unused credits are treated.
The Internal Revenue Service is correcting more than 50,000 taxpayers’ accounts, allowing qualifying adoption credits accumulated in earlier years to help generate a refund for tax year 2025. The adjustments began in late September, with most eligible refunds expected to be completed by the end of 2026.
The reason for the payments lies in how the adoption credit worked when those families first claimed it. A household could have qualifying adoption expenses and an allowable federal credit, yet owe too little income tax to receive its full value. The credit reduced the tax bill, but the unused portion generally could not be paid to the family.
Instead, that balance moved onto a future return. Families could carry unused credits forward for up to five years, hoping to apply them against later federal income taxes. If their tax liability remained too low, some of the benefit could expire before they were able to use it.
The 2025 federal tax law changed that arrangement by making up to $5,000 of the adoption credit refundable per eligible child. Refundability allows an eligible taxpayer to receive the benefit even when there is no federal income tax left for the credit to offset.
Treasury subsequently clarified that, for tax year 2025 only, qualifying unused adoption credits originating from 2020 through 2024 could be included in that refundable calculation. That interpretation opened access to refunds for families whose earlier adoption expenses had produced credits they were still carrying on their tax records.
The IRS identified 2025 returns where the refundable credit may have been understated because the calculation excluded those older balances. The agency is now adjusting those accounts using information already submitted, rather than requiring each affected household to file another return.
For those families, the money comes from an adoption tax benefit they had previously qualified for but had not fully received. The correction changes how that available credit can be used on the 2025 return.
The amount will vary. Although the refundable portion is capped at $5,000 per eligible child, that ceiling does not guarantee a $5,000 check. Available credit balances, applicable limitations, amounts already received and other account information determine the result.
A household may receive a smaller refund or have an outstanding tax balance reduced. Certain overdue debts can absorb some or all of the resulting payment. Families who already received the correct refundable adoption credit will not receive an additional amount through this adjustment.
Eligibility generally requires a filed 2025 federal income tax return, prior-year adoption credits available for use in 2025 and records establishing that the refundable portion should increase. Credits originating before 2020 have passed the five-year carryforward period and are unavailable for this correction.
Form 8839, which reports qualified adoption expenses and calculates the credit, provides information needed for the review. Taxpayers who omitted the adoption credit from their 2025 return may still receive an automatic adjustment if earlier forms establish the unused balance and give the IRS enough information to calculate the benefit.
Where those records are incomplete, an amended return may be necessary to establish or correct the claim. Taxpayers whose accounts contain sufficient information generally should not amend their returns solely to request the automatic adjustment.
Families who filed their 2025 returns before April 15, 2026, generally need no further action. Those who filed under an extension remain eligible for review after processing. Identity theft indicators, account freezes, conflicting dependent claims and other unresolved issues can delay an adjustment until the underlying problem is resolved.
An explanatory notice generally will arrive within 30 days after the IRS makes the correction. It will identify the account change and whether the adjustment produces a refund or is applied toward a debt. Taxpayers can also review their IRS Online Account or obtain an account transcript. The Where’s My Refund? service will not track this particular correction.
The adoption credit covers qualifying costs associated with eligible domestic, international, private and public foster care adoptions. Expenses can include adoption fees, attorney fees, court costs and certain travel costs. Separate rules allow some finalized adoptions of U.S. children formally determined to have special needs to qualify even when families paid no qualifying expenses.
The current corrections apply specifically to the treatment of earlier credits on 2025 returns. Using those balances to generate a refundable credit now may reduce what remains available for future years. Families will need to retain their adjustment notices and update their carryforward records before preparing their 2026 returns.
For households whose adoption credits remained unused year after year, the correction allows part of that existing benefit to reach them as money, even when their federal income tax bill was too small to absorb it.