Paying Adoption Costs: Tax Credit, Employer Help and Loans

Published by the Modern Lending Solutions editorial team. Last reviewed: October 30, 2026.

Short answer: check the federal adoption credit, any adoption benefits from your employer and, for a child adopted from foster care, adoption assistance from the child welfare agency before you borrow. For tax year 2026, qualified adoption expenses for the credit are limited to $17,670 per child, and up to $5,120 of the credit is refundable (IRS Topic 607). The credit is claimed on your tax return, so it does not pay costs as they come due. This is general information, not legal or tax advice.

The adoption credit and employer benefits, by tax year

The credit and the exclusion apply to international, domestic, private and public foster care adoptions. You can claim both, but not for the same expenses, and the maximum applies to each child, not each calendar year (IRS Topic 607).

	Tax year 2025	Tax year 2026
Most per eligible child (credit; also the employer benefit exclusion)	$17,280	$17,670
Refundable part of the credit, per child	up to $5,000	up to $5,120
Modified AGI where the amount starts to phase out	over $259,190	over $265,080
Modified AGI where it is fully phased out	$299,190 or more	$305,080 or more

Sources for the table: 2025 from the Form 8839 instructions (2025); 2026 from IRS Topic 607. For 2026, the IRS says a refundable credit claim needs Schedule 3-A (Form 1040), and the non-refundable part can be carried forward for up to 5 years, after which any remainder is forfeited. For tax year 2025 only, unused adoption credit carryforwards from 2020 to 2024 may be refundable up to $5,000 per eligible child (IRS Topic 607).

Which expenses count

Qualified adoption expenses are reasonable and necessary expenses paid to adopt, including adoption fees, attorney fees, court costs, travel (including meals and lodging) while away from home, other expenses directly related to the legal adoption, and expenses paid before a child is identified, such as home study fees. They do not include expenses to adopt your spouse's child, for a surrogate parent arrangement, allowed for another federal credit or deduction, paid by a federal, state or local program, reimbursed by your employer, or that violate state or federal law (IRS Topic 607). The child must be under 18 or unable to care for themselves (IRS Topic 607).

When you can claim it

Type of adoption	When expenses can be claimed
Domestic, finalized	Each year as you pay them
Domestic, still in progress	The year after you pay them
Foreign	The year the adoption becomes final
Special needs	The year the adoption becomes final, even with no qualified expenses

Source: IRS Topic 607. For a foreign adoption, that means paying the costs first and claiming them only once it is final. Plan how you will cover the gap.

Adoption benefits from your employer

Benefits your employer pays for qualified expenses under a written qualified adoption assistance program, directly or through a third party, can be excluded from your income up to the yearly limit above. They show on Form W-2, Box 12, Code T. You subtract them before working out the credit: the IRS example is $10,000 of expenses with $4,000 reimbursed, leaving a maximum credit of $6,000 (IRS Topic 607). Ask your employer's benefits office whether it has such a program and what it pays.

Adopting a child from foster care

Under federal law, the amount of ongoing adoption assistance payments is set by agreement between the adoptive parents and the state or local agency, taking into account the parents' circumstances and the child's needs, and may not exceed the foster care maintenance payment the child would have received in a foster family home (42 U.S.C. 673(a)(3)).
For a child the agency determines has special needs, it can also pay nonrecurring adoption expenses: reasonable and necessary adoption fees, court costs, attorney fees and other costs directly related to the legal adoption. There is no income test for this, and the agreement must be signed at or before the final adoption decree (45 CFR 1356.41).
Federal matching covers agency spending on these one-time expenses of up to $2,000 per adoptive placement, and an agency may set a lower maximum (45 CFR 1356.41(f)). Ask the agency what it pays before the adoption is final.
For a special needs adoption, the IRS lets you claim the full credit even if you paid no qualified expenses (IRS Topic 607).

Who qualifies as a child with special needs is set by federal law and decided by the state or tribal agency (42 U.S.C. 673(c)). This page does not cover any state's program.

If you still need to borrow: what it costs

Example only, our calculation: $6,000 borrowed and repaid in 24 equal monthly payments, no fees, at the August 2026 averages of 11.90% for a 24-month personal loan and 22.36% for credit card plans (Federal Reserve G.19). Your own rate depends on your credit and the lender.

	Monthly payment	Interest	Total repaid
Personal loan, 11.90% APR	$282.16	$771.84	$6,771.84
Credit card, 22.36% APR	$312.34	$1,496.16	$7,496.16

Loan payment: P x r / (1 - (1 + r)^-n), r = APR / 12, rounded to the cent. A card payment depends on your card's minimum payment rules; this example assumes you pay the same fixed amount each month until the balance is gone. If you plan to pay a loan down with a tax refund, check first whether your credit will be refundable and in which year you can claim it.

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Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.

Paying for Adoption Costs: Options Before a Loan