The Essential Guide To Adoption Tax Credits in 2025 

In the U.S., 100,000 children are adopted every year – that’s one in 35 children.¹ If you are considering growing your family through adoption, two key tax breaks are available that can help eligible parents offset the costs.  

In 2025, adoptive parents may claim a federal tax credit for up to $17,280 of “qualified adoption expenses” for each child, an increase from $16,810 in 2024.^2,3 This tax credit directly reduces the amount of tax owed. 

Additionally, adoptive parents can exclude from an employee’s gross income up to $17,280 in 2025 ($16,810 in 2024) of qualified expenses paid by an employer under an adoption assistance program. However, both the credit and the exclusion are gradually reduced and eventually phased out for higher-income parents.⁴ 

Parents can claim both a credit and an exclusion for adoption expenses, but not for the same expenses. 

Which expenses qualify? 

To be eligible for the credit or exclusion, expenses must be “qualified adoption expenses.” These include: 

• Reasonable and necessary adoption fees 

• Attorneys’ fees 

• Court fees 

• Travel expenses (including meals and lodging) 

• Other costs directly related to the legal adoption of an “eligible child”  

Qualified expenses do not include: 

• Costs incurred when adopting a spouse’s child 

• Arranging a surrogate parent 

• Violating state or federal law or using funds from a government program 

It’s important to note that: 

• Employer-reimbursed expenses do not qualify for the credit but may be eligible for the exclusion 

• Expenses related to an unsuccessful adoption attempt may qualify  

• Expenses for a foreign adoption (where the child is not a U.S. citizen or resident) qualify only if the adoption is finalized 

Taxpayers adopting a child with special needs are considered to have qualified adoption expenses in the tax year the adoption is finalized, up to $17,280 in 2025 ($16,810 in 2024). They can claim the adoption credit or exclude employer adoption assistance up to that amount, regardless of actual expenses incurred. 

Who is an eligible child? 

An eligible child is under 18 at the time of payment of qualified expenses. A child who turns 18 during the year is eligible for the portion of the year they were under 18. A person who is either physically or mentally incapable of self-care is eligible regardless of age. 

A special needs child is one whom the state has determined cannot or should not be returned to their parents and who cannot be placed with adoptive parents without assistance due to specific factors or conditions. Only U.S. citizens or residents are included in this category. 

What are the phaseout amounts? 

The credit in 2025 begins to phase out for taxpayers with adjusted gross incomes (AGIs) over $259,190 ($252,150 in 2024) and is not available when AGI reaches $299,190 ($292,150 in 2024).⁵ 

Note: The adoption credit is non-refundable. If your tax credits, including the adoption credit, exceed your tax liability for the year, the excess amount will not be refunded. You can only claim the credit up to the amount of your tax liability. Any unused adoption credits are available for up to a five-year carryover period.    

Does my state offer additional adoption credits? 

Currently, 41 states have an income tax. Of these, many offer some type of deduction or credit. Check with your tax professional for current allowances for possible state tax reductions. 

If you have questions or need assistance, contact your advisor. We can help ensure you receive the full benefit of the tax savings available to adoptive parents. If you’re not a client, let’s talk. 

¹ “Adoption Statistics.” Lifelong Adoptions, Accessed Jan. 8, 2025. 

² “The 2025 Federal Adoption Tax Credit.” AdoptHelp, Accessed Jan. 21, 2025.  

³ “Adoption Credit.” IRS, Accessed Jan. 21, 2025.  

⁴ Mengle, Rocky. “Adoption Tax Credit for 2024.” TurboTax Tax Tips & Videos, TurboTax, Jan. 9, 2025.  

⁵ “Adoption Tax Credits: Easing the Financial Journey of Parenthood.” Jefferson, Urian, Doane & Sterner, P.A., Accessed Jan. 21, 2025.