The Internal Revenue Service has already begun issuing refunds to more than 50,000 taxpayers who benefited from the adoption tax credit carryforward and expects the refund process for most eligible taxpayers to be complete by the end of the year.
The Treasury Department clarified its interpretation of the Working Families Tax Cuts affecting the adoption tax credit. Under the new interpretation, for tax year 2025 only, adoption tax credit carryforwards from prior tax years (2020-2024) can increase the amount of the adoption tax credit that is refundable in 2025, subject to the $5,000 per qualifying child limitation.
“By issuing refunds without requiring eligible families to file an amended return, the IRS is helping reduce the financial burden on those who decided to adopt a child into their family,” said IRS Chief Executive Officer Frank J. Bisignano. “This administrative change will help families access the tax benefits they are entitled to as quickly and simply as possible.”
IRS will adjust affected taxpayers’ accounts to reflect this change and issue any resulting refunds, notifying taxpayers of any changes made to their accounts. Taxpayers should not need to file an amended return to receive the additional credit. This approach offers immediate relief to affected taxpayers, lessening the burden and reducing the necessity to file amended returns.
Taxpayers will receive notices from the IRS, generally within 30 days of the adjustment, informing them of the amount and whether the adjustment resulted in a refund or was applied towards another tax or non-tax debt. Taxpayers should review the notice carefully, compare it with their 2025 tax return, and keep it with their tax records.