IRS begins adoption-credit refunds for more than 50,000 taxpayers

The IRS says it has begun issuing refunds to more than 50,000 taxpayers after changing how certain adoption-credit carryforwards are treated for tax year 2025. The account adjustments began in late September, and the agency expects to complete most eligible cases by the end of 2026.

The change covers qualifying adoption-credit carryforwards from tax years 2020 through 2024 that were available for use in 2025. They may be included in determining the refundable portion of the 2025 credit, subject to applicable rules and a limit of $5,000 per eligible child. The adjustment is limited to eligible taxpayers whose accounts show that the refundable credit should increase.

An adjustment does not guarantee a cash payment. Depending on a taxpayer’s allowable credit, available carryforwards and other account details, it may result in a refund, reduce a balance due or make no change. A refund may also be applied to other tax or non-tax debts.

Who may qualify for an adjustment i

The IRS says eligibility generally depends on having filed a 2025 federal return, having a claimed or allowable adoption credit and having carryforwards available for use in 2025. Return and account information must also indicate that the refundable credit should increase. Claiming an adoption credit alone does not establish eligibility.

The agency says some taxpayers who did not claim the credit on their 2025 return may also be considered if they filed Form 8839 reporting an adoption-credit carryforward for one or more years from 2020 through 2024. The IRS reviews accounts individually to determine whether an adjustment applies.

Taxpayers who filed their 2025 return before April 15, 2026, generally receive any applicable adjustment automatically, but that filing date by itself does not establish eligibility. Returns filed under an extension, as well as accounts with identity-theft indicators, freezes, dependency conflicts or other issues, may be reviewed later, after processing or resolution of the issue.

Eligible taxpayers generally do not need to file an amended return solely to receive this account adjustment. The IRS says it generally sends a notice within 30 days after making an adjustment. Taxpayers should review that notice to see what changed and whether a refund was offset against another liability.

How to calculate the carryforward for 2026 i

For a 2026 return, the IRS directs taxpayers to the Nonrefundable Adoption Credit Carryforward Worksheet—Line 18 in the 2025 Instructions for Form 8839. For line 8, taxpayers should add the amount on their 2025 Form 8839, line 18, to the increase in refundable adoption credit resulting from the account adjustment.

The credit increase can be found on the adjustment notice, a 2025 tax account transcript or a record of account transcript. The total refund, reduced balance due or amount due shown on a notice is not necessarily the credit increase. Those totals may also reflect payments, other credits, offsets, interest, penalties or separate account adjustments, so substituting the overall account change could produce an incorrect carryforward calculation.

The IRS’s adjustment differs from guidance it issued in February 2026, which said the nonrefundable portion of the adoption credit could be carried forward for up to five years but could not produce a refund. The IRS attributes the later interpretation to a clarification by the Treasury Department. Taxpayers calculating a carryforward for 2026 should use the credit increase and worksheet steps specified by the IRS. The IRS says this special treatment applies only to tax year 2025 and does not make carryforwards refundable for tax year 2026.