The IRS is automatically issuing refunds to more than 50,000 taxpayers whose 2025 returns involved unused adoption credit carried forward from 2020–2024. For tax year 2025 only, those carryforwards can raise the refundable part of the credit, up to $5,000 per child. Most families do not need to file anything.
The IRS announced the change on October 16, 2026, in news release IR-2026-123. Refunds and account adjustments began in late September, and the agency expects to finish for most eligible taxpayers by the end of 2026. The Treasury Department clarified how it reads the Working Families Tax Cuts law as it applies to the adoption credit, and the IRS found returns where the calculation left out prior-year carryforwards. Rather than asking families to amend, the IRS is correcting those accounts itself.
Who may get an adjustment
The adoption credit covers qualified costs of adopting a child, such as adoption fees, attorney fees, court costs and travel. Any unused, nonrefundable portion can be carried forward for up to five years, oldest amounts first. That is why carryforwards from 2020 through 2024 count for 2025; anything older has expired.
According to the IRS, you may be adjusted automatically if you:
- filed a 2025 Form 1040, 1040-SR or 1040-NR,
- claimed the credit on Form 8839, or were eligible for it,
- had a carryforward from 2020–2024,
- and your 2025 return and account data show the refundable credit should be higher.
The refundable portion for 2025 is capped at $5,000 per eligible child. The final amount depends on factors such as the number of children, income limits, other credits and any balance due, so the result may be a refund, a smaller balance due or no change at all.
Do you need to do anything?
Usually not. If you filed your 2025 return before April 15, 2026, any adjustment should happen automatically. Returns filed on extension, and accounts with freezes, identity theft indicators or dependency conflicts, will be reviewed later in 2026, once those issues are resolved.
The IRS asks taxpayers not to file Form 1040-X just to request this adjustment. An amended return may be needed if the IRS lacks the information to calculate it – for example, if you had a carryforward on a 2020–2024 Form 8839 but did not enter it on your 2025 return – or if your return has other errors.
Notices and refunds
- Watch your mail. The IRS generally sends a notice within 30 days of an adjustment, showing the amount and whether it was refunded or applied to another debt.
- “Where’s My Refund?” will not show it. Check your IRS Online Account or request a tax account transcript instead.
- Offsets are possible. Past-due debts can reduce the refund, and the IRS will explain any offset in a notice.
- Keep the notice with your 2025 return. You will need the increase it shows to figure the carryforward on your 2026 return.
The adoption credit for 2026
Families adopting now will use the 2026 limits: up to $17,670 in qualified expenses per child, of which up to $5,120 is refundable. The full credit is available with modified adjusted gross income (MAGI) of $265,080 or less, and none at $305,080 or more. For a foreign adoption, the credit is claimed in the year the adoption becomes final. The IRS also notes that this year’s adjustment does not make the carryforward refundable again in 2026.
Sources: IRS news release IR-2026-123, October 16, 2026; IRS Q&A on the adoption tax credit carryforward; IRS adoption credit page.
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