One of the biggest questions families ask is: how do we afford adoption? The good news is that the 2026 Federal Adoption Tax Credit is a powerful financial benefit designed to help adoptive parents offset domestic adoption costs. Private employers also may provide adoption benefit plans for employees that can be taken in addition to the tax credit.

How the 2026 Federal Adoption Tax Credit Works

For 2026, the federal credit is $17,670 per child. This is not a deduction. It is a dollar-for-dollar tax credit that reduces the taxes you owe. In other words, it is a check to you in the amount of $17,670 from the federal government. If your credit is larger than your tax bill, the remainder can be carried forward for up to five years. Review the IRS adoption credit page for more information.

Who Qualifies? (2026 Income Limits)

You may claim the full credit if your Modified Adjusted Gross Income (MAGI) is $265,080 or below. The credit begins to phase out between $265,080–$305,080, and phases out entirely at $305,080 and above. Your MAGI is not your gross income, it reflects your adjusted gross income after certain deductions and tax-preferred contributions.

Because of this, families whose income may exceed the phase-out range can often plan ahead with their accountant to legally reduce their MAGI in the year the adoption is finalized. Common strategies may include:

• Increasing 401(k), 403(b), or other pre-tax retirement plan contributions
• Contributing to a Health Savings Account (HSA) or Flexible Spending Account (FSA) (if eligible)
• Maximizing self-employed retirement plan contributions, if applicable
• Deducting qualified business expenses or student loan interest, where applicable
• Timing certain income or deductions to the next or previous tax year

Some advance planning can help ensure families receive the maximum benefit available under the adoption tax credit while completing their adoption journey.

What Expenses Qualify?

Most domestic adoption expenses count, including:

• Adoption agency fees
• Attorney fees and court fees
• Travel, meals and lodging associated with the adoption
• Required home-study or safety-upgrade expenses (e.g., pool-fencing)

Expenses that do not qualify include:

• Reimbursements from your employer’s adoption benefit program
• Stepparent adoptions or surrogacy arrangements

When Can I Claim The Adoption Tax Credit?

You can claim the adoption tax credit in the year after you incurred the expenses or the year you finalize the adoption, whichever is sooner. Also, if you incur expenses in the year after the adoption is finalized, you may take the tax credit in the year you incurred the expenses. The rule is different if you adopt abroad through Hague accredited international adoption. In international adoption, the federal tax credit can only be taken after the adoption is finalized.

What If the Adoption Is Unsuccessful?

If your adoption attempt is unsuccessful, qualified expenses can still count. Use IRS Form 8839 (“Qualified Adoption Expenses”) to claim the credit. The federal adoption tax credit can apply to both failed and successful domestic adoption attempts, but the limit is per child, not per attempt.

For U.S. children, qualified adoption expenses you pay in connection with a failed adoption attempt of a specific child is still eligible for the credit. However, if you later make another attempt to adopt (for example, a second match after a failed one) as part of your plan to adopt one child, the IRS requires you to combine the expenses from all those attempts and apply a single per-child maximum credit to the total. In other words, you get two credits for two successful adoptions because they involve two separate children but you only get one credit for a failed attempt followed by a successful one.

The IRS illustrates this in the Instructions for Form 8839 under “Attempted Adoptions of U.S. Children,” Example 1, where a taxpayer spends $10,000 on a failed match and $8,000 on a later successful adoption and must treat the $18,000 of expenses together under the one per-child limit. IRS+1 You can share this reference with your tax professional:

IRS Instructions for Form 8839 (see “Attempted Adoptions of U.S. Children,” Example 1): https://www.irs.gov/instructions/i8839

For international adoptions, the rules are different: if the adoption is never finalized, expenses generally do not qualify for the credit.

Employer Benefits for Adoption

Many employers offer Employer Adoption Assistance Programs that reimburse part or all of your adoption costs. This is very common among Fortune 500 companies, technology companies, banks, entertainment companies, national law firms, etc.

Typical employer reimbursements and stipends are between $10,000 and $50,000. Under a qualified benefit plan, you may exclude those payments from taxable income which helps keep your MAGI lower and increase your eligibility for the federal adoption credit.

Here’s how it works:

• You exclude the employer benefit (up to IRS limit) from income
• You use the adoption credit for the portion of expenses not reimbursed
• You cannot use the same expense for both the exclusion and the credit

Example

Adoption expenses: $60,000
Employer benefit: $30,000 (tax-free exclusion)
Remaining out-of-pocket expenses: $30,000 → eligible for the $17,670 adoption credit

Total benefit:
Tax-free employer assistance: $30,000
Federal adoption tax credit: $17,670
Total combined benefit: $47,670

With smart planning, many families recover tens of thousands of dollars toward adoption costs through the combination of employer benefits + the federal adoption tax credit.

State Adoption Tax Credits & Deductions

In addition to the federal adoption tax credit, many states offer state adoption tax credits and deductions. Knowing your state’s benefits is an important part of adoption planning.

Here are selected examples (check your state’s revenue/finance department for current details):

• Ohio – Up to $10,000 per child nonrefundable state credit, with carry-forward.
• California – Up to $2,500 per child nonrefundable state credit for eligible costs.
• Iowa – Up to $5,000 per child refundable state credit for unreimbursed adoption expenses.
• Missouri – Up to $10,000 per child nonrefundable state credit for qualified adoption expenses; up to five-year carry-forward.
• Wisconsin – Up to $5,000 per child state income-tax deduction for qualified adoption expenses.

Pro Tip: Search “[Your State] adoption tax credit” and confirm details with your tax professional.

Together, the federal credit + state credit/deduction + employer adoption benefits can dramatically reduce the net cost of adoption.

Important Disclaimer

Adoption tax benefits are subject to change. Also, how the tax code is written, and how it actually is implemented and enforced, requires specific facts to be assessed by a certified tax professional. This article is for informational purposes only and does not provide tax or legal advice. Always consult a qualified tax professional and your state’s revenue department for your individual eligibility and current rulesets.