IRS automatically refunds adoption tax credits
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The Internal Revenue Service began issuing automatic refunds in late September to over 50,000 taxpayers who previously claimed adoption tax credits but did not receive the full benefit.
The refunds stem from a clarification issued by the Department of the Treasury regarding the Working Families Tax Cuts law, part of the One Big Beautiful Bill.
This clarification, valid for the 2025 fiscal year, allows unused adoption credit balances from 2020 to 2024 to increase the refundable portion of the credit, up to $5,000 per eligible child. Previously, these unused balances could only lower a taxpayer's tax liability and did not result in a direct refund if taxes were fully paid. The IRS is proactively identifying eligible accounts and issuing refunds without requiring taxpayers to file amended returns. Frank J.
Bisignano, CEO of the IRS, stated the agency is easing the financial burden on adoptive families. Taxpayers who filed their 2025 returns before April 15, 2026, are receiving adjustments automatically, while those with extensions or flagged accounts will be reviewed later. The IRS will notify each taxpayer about the adjustment amount and how it was applied, either as a direct refund or towards other debts.
The maximum adoption tax credit for 2025 is $17,280 per child, though the refundable portion remains capped at $5,000.
