ADOPTION CREDIT EXAMPLE
01.Core Concepts
In 2026, Jack and Callie paid $18,000 in qualifying adoption expenses to adopt an eligible child. The adoption became final in 2026. Their MAGI for the year is $155,000 and their tax lia bility before the application of the qualified adoption expenses credit is $11,000. Because they have eligible expenses equal to (or in excess of) the full credit amount of $17,670,and their MAGI is below the phaseout range, they can claim the full credit amount of $17,670. Prior to OBBBA 2025, because the adoption credit was a nonrefundable credit only, they could only use $11,000 of the credit to offset their tax liability. The additional $6,670 would have been carried forward for up to five years. However, OBBBA 2025 makes up to $5,120 of the adoption credit refundable in 2026. $11,000 of the nonrefundable portion will offset their $11,000 tax liability for the current year. The $5,120 refundable portion of the credit will be refunded to them for the 2026 tax year. The remaining $1,550 of nonrefundable credit will carry forward for up to five years.