How does the adoption tax credit work?

The adoption credit helps offset the cost of adopting a child. For 2025 it's worth up to about $17,280 in qualified adoption expenses per child, covering adoption fees, court and attorney costs, and travel. It's a nonrefundable credit, so it can reduce your tax to zero but won't generate a refund beyond that; any unused amount carries forward for up to five years. The credit phases out at higher incomes, beginning around modified AGI of $259,190 and disappearing near $299,190 in 2025. For adopting a child with special needs, you may claim the full credit even if your actual expenses were lower. Separately, if your employer offers adoption assistance, you may be able to exclude a similar amount from income, though you can't use the same expenses for both. Keep careful documentation of all costs.