The Internal Revenue Service has started issuing refunds tied to unused adoption tax credits after a change enacted in the Working Families Tax Cut law, the agency said. About 50,000 taxpayers will receive adjustments, with refunds capped at $5,000 per adopted child.
what happened
Under the earlier rule, adoption tax credits carried forward could only offset federal income tax that a filer owed. Lower-income families who had little or no tax liability could not use the credit and the carryforward could sit unused. The 2025 law change made a modification for the 2025 tax year that allowed some of those carried-forward adoption credits to produce refunds.
- The refunds apply to taxpayers who carried an unused adoption credit from tax years 2020 through 2024 and filed their return before April 15, 2026.
- The adjustment may result in a refund, a reduced balance due or no change, depending on a taxpayer’s account.
- No action by eligible taxpayers is required; the IRS will issue the adjustment automatically and send a notice within 30 days of making the change.
“You may not receive an adjustment if you already received the correct refundable adoption credit, if you do not have adoption credit carryforwards available for use in 2025, or if the IRS does not have enough information to make the adjustment because, for example, you did not file a federal income tax return for tax year 2025 or have never claimed the adoption credit despite being eligible to do some,” the IRS said.
who qualifies and how much
To be eligible for an automatic adjustment, a taxpayer must have:
- carried an unused adoption credit from any year 2020 through 2024 into 2026, and
- filed a federal income tax return before the April 15, 2026, filing deadline.
Refunds are limited to $5,000 per adopted child. The IRS said the adjustment applies only to the 2025 tax year. The agency cautioned that not everyone who thinks they qualify will receive an adjustment — for example, people who already received a correct refundable adoption credit, those without available carryforwards, or cases where the IRS lacks necessary return information.
next steps and timing
The IRS expects to complete the adjustments by the end of the year. Eligible taxpayers will receive a notice from the agency within 30 days of the adjustment that explains the change to their account.
Taxpayers who believe they qualify but do not receive an adjustment can review their account statements and, if needed, contact the IRS for further information once notices have been issued.
