Questions and Answers about Refundability and Recognizing Indian Tribal Governments for Purposes of Making a Special Needs Determination for the Adoption Tax Credit

FS-2026-03, February 2026

This Fact Sheet provides answers to frequently asked questions about refundability and Special Needs Determinations made by Indian tribal governments for the Adoption Tax Credit.

These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Accordingly, these FAQs may not address any particular taxpayer’s specific facts and circumstances, and they may be updated or modified upon further review. Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer’s case, the law will control the taxpayer’s tax liability. Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made.

Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so.

More information about reliance is available on IRS.gov. These FAQs were announced in IR-2026-27.

Background

The Internal Revenue Code allows for a credit for certain adoption expenses. The adoption tax credit is based on your qualified adoption expenses, which are limited to $17,280 per qualifying child for 2025. If a taxpayer adopts a child with special needs, the taxpayer might be able to claim the maximum adoption tax credit.

For more general information, including determining who is eligible for the adoption tax credit, what expenses constitute qualified adoption expenses, how to determine the credit or exclusion, including in the case of an adoption of a child with special needs, and how to claim the credit, see Adoption Expenses.

The One, Big, Beautiful, Bill Act, P.L. 119-21, made two principal changes to the adoption tax credit:

• OBBBA made the adoption tax credit refundable up to $5,000 (indexed for inflation). The non-refundable portion of the credit can be carried forward for a maximum of 5 (five) years; however, it cannot result in a refund. Any remaining non-refundable portion after

5 (five) years is forfeited.

• Before OBBBA, only state governments could make a determination of whether a child has “special needs” for purposes of the adoption tax credit. OBBBA now provides parity for Indian tribal governments so that state government and Indian tribal government determinations of special needs are both recognized for purposes of the adoption tax credit.

These changes apply to tax years beginning after 2024.

• Topic A: General Refundability
• Topic B: Indian tribal government determinations of a “child with special needs”

Topic A: General Refundability

Q1. I had qualified adoption expenses in 2025 for the adoption of a child. The adoption was finalized in 2025. I claimed the non-refundable credit and a $5,000 refundable adoption tax credit for my qualified adoption expenses. I still have unused credit amounts from my 2025 qualified adoption expenses. Can I use them to calculate the adoption tax credits in future years?

A1. Yes, you can carry over unused credits up to five future years to calculate only the non-refundable portion of the adoption tax credits in those future years.

Q2. I incurred qualified adoption expenses for the adoption of two children in 2025. May I claim and benefit from the adoption tax credit for multiple adoptions?

A2. Yes, you may claim an adoption tax credit up to the per child limit ($17,280 for 2025) for each child, $5,000 of which may be refundable per child, if all other requirements are met.

Q3. Is the refundable portion of the adoption tax credit only available in the first year I claim it?

A3. No, you may be eligible to claim the refundable adoption tax credit each year you have qualified adoption expenses, up to $5,000, but cannot exceed the per child limit ($17,280 for 2025). However, if you have no qualified adoption expenses for the tax year other than qualified adoption expenses carried over from a prior tax year, see Q1 under Topic A.

Topic B: Indian tribal government determinations of a “child with special needs”

Q1. Can a tribal government designate an adoptee, without a physical or mental disability, as “special needs”?

A1. Yes, “a child with special needs” for purposes of the adoption tax credit may have a different meaning from "a child with special needs" for other purposes. For your child to be considered a “child with special needs,” a State or Indian tribal government must have determined that (A) the child cannot or should not be returned to the home of the child’s parents; (B) the State or Indian tribal government has determined that there exists with respect to the child a specific factor or condition (such as their ethnic background, age, or membership in a minority or sibling group, or the presence of factors such as medical conditions or physical, mental, or emotional handicaps) because of which it is reasonable to conclude that such child cannot be placed with adoptive parents without providing adoption assistance; and (C) the child is a citizen or resident of the United States including its possessions.

Q2. I adopted a child subject to the Indian Child Welfare Act (ICWA). Does this child meet the definition of "special needs" for purposes of the adoption tax credit?

A2. Yes, if an Indian tribal government determines that an adoption of a child subject to the ICWA meets the definition of “special needs.” (See Example 5 in the discussion of column (d) in the Instructions for Form 8839 , Qualified Adoption Expenses, involving a tribal special needs determination for a child subject to the ICWA.)

Q3. I adopted a child that was determined to be a child with special needs by an Indian tribal government and the adoption was finalized in early 2025, prior to the enactment of OBBBA on July 4, 2025. Am I still eligible to claim the adoption tax credit for this child?

A3. Yes, as of January 1, 2025, Indian tribal government determinations on a “child with special needs” are recognized for purposes of the adoption tax credit. Therefore, you may be eligible to claim an adoption tax credit related to the adoption of this child.

Q4. I adopted a child who would qualify as a “child with special needs” subject to the ICWA in early 2025 prior to the OBBBA enactment on July 4, 2025, but there was no special needs determination from a Tribal court or agency at the time of the adoption. I received a special needs determination from a Tribal court or agency for this adoption after the date of OBBBA enactment. Am I still eligible to claim the adoption tax credit for this child?

A4. Yes. Beginning in tax year 2025, Indian tribal government determinations on a “child with special needs” are recognized for purposes of the adoption tax credit. Thus, you may be able to get an adoption tax credit for 2025 because an Indian tribal government determined that the child is a “child with special needs,” assuming all other requirements are met.

Q5. What documentation or paperwork is acceptable to show that a “child with special needs” determination was made by a State or Indian tribal government?

A5. Acceptable documentation of the State or Indian tribal government’s determination of a “child with special needs” includes, but is not limited to:

• An adoption assistance or subsidy agreement issued by the State, Tribal court, or Tribal government representative;
• Certification from the State, county or Tribal welfare agency, or Tribal government verifying that the child is approved to receive adoption assistance;
• Certification from the State, county, or Tribal welfare agency, or Tribal government verifying that the child has special needs; or
• An official letter on State, county, or Tribal government letterhead confirming the special needs determination.

Q6. I adopted a child with special needs as determined by an Indian tribal government, which provided car seats, diapers, counseling, and other services to supplement support in lieu of monetary adoption assistance. The adoption was finalized in 2025 and throughout the adoption process, I did not incur or pay any expenses related to the adoption of this child. May I still qualify for the adoption tax credit related to the adoption of this child?

A6. Yes, even though you did not incur or pay any qualified adoption expenses to adopt this child, you will be treated as having paid the maximum amount of expenses allowable for the 2025 tax year since the adoption (1) involved a child with special needs and (2) was finalized. Therefore, you may still qualify for an adoption tax credit, if all other requirements of the credit are met.

Q7. I do not owe federal income taxes because my income is derived from Treaty Fishing Rights and is excluded from gross income for tax purposes. May I claim and benefit from the adoption tax credit if I do not have any income tax liability?

A7. Yes, the adoption tax credit is refundable up to $5,000 (and is indexed for inflation), beginning tax year 2025. Unlike a non-refundable tax credit, a refundable tax credit may result in a refund if you have no tax liability to offset or the credit exceeds what you owe.