From the official announcement by IRS ↗
The Internal Revenue Service (IRS) has announced important changes to the Adoption Tax Credit, according to the latest notice on irs.gov. The most significant change: a portion of this credit is now refundable, meaning families can receive cash back from the IRS even if they do not owe taxes — previously, this credit only reduced the amount of tax owed, and those with no tax liability would lose any unused portion.
The credit applies to expenses related to adoption such as court fees, legal fees, and can be used for all four types: international adoption, domestic adoption, private agency adoption, or adoption through the foster care system. The IRS did not announce a specific effective date in this notice, so families need to monitor the tax filing instructions for the current year to determine which tax year this applies to.
This is part of the Working Families Tax Cuts legislation, a law that nearly half of all tax filers in the 2026 tax season have already used to receive additional new deductions. For Vietnamese Americans, the directly benefiting group includes families that are currently or about to adopt — from couples bringing orphaned children from Vietnam home, to families adopting children through the foster care system in the United States.
Regarding dollar amounts, the federal adoption tax credit was previously set at 13,570 USD per child under the previous rate, and gradually phased out as family income exceeded a certain threshold. Actual costs for domestic adoption can reach tens of thousands of dollars, while adoption through the foster care system is typically much less expensive. According to analysis by the Congressional Research Service, a refundable tax credit can exceed the amount of tax owed, providing primarily cash to low-income taxpayers — a group that previously had little or no tax liability to fully utilize a nonrefundable credit.
See the official IRS notice at the source link below.
The refundable portion of the credit allows families to receive cash back even if they owe the IRS no taxes.
Analysis
This change appears in the context where the adoption tax credit was once proposed to be completely eliminated nearly a decade ago, when a 2017 Republican tax bill sought to remove this provision — facing backlash from adoption advocacy groups and religious organizations, who argued that the credit directly influenced many families' adoption decisions 3. This time, rather than cutting, the government is expanding it in a way more favorable to low-income taxpayers — a trend consistent with how the Working Families Tax Cuts legislation designed many new deductions for seniors, those receiving tips, and those working overtime 2. Notably, the IRS has not yet announced specific income thresholds or exact refund amounts under the new rules, so families will need to await more detailed tax filing instructions in the coming months.
Diaspora Impact
Families currently in the process of adopting — whether internationally, domestically, through private agencies, or via the foster care system — should keep complete records of legal expenses, court fees, and related costs to claim on their tax return. There is no need to take action immediately at this point, but when filing taxes for the current year, families should carefully review the adoption credit section on their return or consult a tax professional to take advantage of the new refundable portion. Updated information and eligibility requirements are available at the official IRS website irs.gov/adoptions — do not rely on unofficial intermediary services to avoid errors or unnecessary fees.