This bill converts the existing adoption tax credit into a refundable credit, meaning families who adopt children can now receive the full credit amount even if they owe little or no income tax. Currently, the credit is non-refundable, so families with lower incomes cannot fully benefit from it. The legislation, introduced by a bipartisan group of senators in April 2025, reclassifies the adoption credit in the tax code and requires the Treasury Department to create a standardized form for verifying legal adoptions. The changes take effect for tax years beginning after December 31, 2024, and any unused adoption credits from prior years can be carried forward and applied as refundable credits. This change primarily benefits middle and lower-income families pursuing domestic or international adoptions by allowing them to receive the credit value as a refund rather than just reducing their tax liability.
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