In brief
Unused adoption credits from 2020 through 2024 may increase the refundable credit for 2025 only.
The refundable amount remains subject to a $5,000 limit per qualifying child.
Most eligible taxpayers should receive automatic adjustments by year-end; some accounts need later review.
The change applies to 2025, not every carryforward
The IRS has begun issuing adoption credit refunds to more than 50,000 taxpayers, giving firms a reason to revisit client records without immediately reaching for an amended return. The agency expects to finish processing most eligible taxpayers by the end of 2026.
Treasury has clarified its interpretation of the tax law so that adoption credit carryforwards from 2020 through 2024 can increase the refundable adoption credit for tax year 2025. The change is limited to that year, and the refundable amount is still capped at $5,000 per qualifying child.
That distinction matters. A carryforward balance is not a promise of a refund for the same amount, and the announcement does not turn every future adoption credit carryforward into cash. The practical question is how the revised treatment changes a particular client's 2025 calculation.
The IRS is adjusting accounts itself
Refunds and account adjustments began in late September. The IRS says affected taxpayers generally do not need to act or file an amended return to receive the additional credit. For firms, the first step is identifying affected returns and checking the account, not automatically generating a second filing.
Taxpayers who filed their 2025 returns before April 15, 2026, will generally receive applicable adjustments automatically. Returns filed under an extension, and accounts with identity theft indicators, freezes, dependency conflicts or other problems, are scheduled for review later in 2026 after processing or resolution of the account issue.
Those exceptions are a useful way to sort a follow-up list. A delayed adjustment on an account with an unresolved problem is not necessarily evidence that the IRS missed the new treatment.
Reconcile the notice with the return
The IRS generally expects to send a notice within 30 days of an adjustment. It should explain the amount and whether the change generated a refund or was applied against another tax or non-tax debt. An additional credit therefore will not always produce a matching deposit.
Ask affected clients to share that notice, compare it with the filed 2025 return and retain both in the tax file. The IRS Individual Online Account can also help taxpayers review records, refund status and notices.
The firm's value here is making the adjustment understandable: which carryforward changed, what the IRS applied, and why the cash received may differ. Avoid promising a payment date or a full $5,000 refund before the account-level numbers support it.
