Adoption Credit 2027: $18,250 Limit, Phase-Out From $273,680 to $313,680, $5,280 Refundable

The 2027 figures next to 2026 and 2025

The 2027 figures are from Rev. Proc. 2026-35, sections 3.04 (the credit, Form 8839 Part II) and 3.20 (employer adoption assistance programs, Part III). The 2026 figures are from Rev. Proc. 2025-32, sections 4.04 and 4.18. The 2025 figures are from the 2025 Form 8839 and its instructions. For 2026 and 2027 the IRS states the refundable number as “the amount used in § 23(a)(4)”, so the table uses that label.

The 2025 column comes from the instructions, which state the 2025 maximum as “$17,280 per eligible child”. Between 2025 and 2026 the cap rose $390, or 2.26% (our arithmetic); the 2026 to 2027 step is larger.

Who sits in the band: a household at $250,000 to $320,000

Anyone with MAGI at or below $273,680 in 2027 gets the full cap. At $273,681 the first dollar of reduction starts. The band is short: $40,000 of MAGI takes the credit from $18,250 to zero. That is why the question matters to a household in the $250,000 to $320,000 range, where a bonus, a stock sale, a Roth conversion or a property sale can move MAGI by more than the band.

On the form, MAGI for the credit (line 7) is the amount on Form 1040 line 11b plus any Puerto Rico income exclusion, any amounts from Form 2555 lines 45 and 50 and any amount from Form 4563 line 15. Only qualified adoption expenses enter the credit, up to the cap; the instructions list what counts and what does not (a surrogate parenting arrangement, for example, does not).

How the phase-out works, line by line

The 2025 Form 8839 is the only version of the form that exists today, so this section uses its mechanics with the 2027 numbers from the Revenue Procedure. The 2027 form will be published later and its line numbers could change.

1. Line 6 is the smaller of the remaining cap and the qualified adoption expenses.
2. Lines 7 and 8: if MAGI is more than the start of the band, subtract the start from MAGI. For 2025 the form says “Subtract $259,190 from line 7”; the 2027 start is $273,680.
3. Line 9: divide the result by $40,000, rounded to at least three places, and “Do not enter more than 1.000.”
4. Line 10: multiply line 6 by that decimal. Line 11a is line 6 minus line 10.
5. Line 11b is the smaller of line 11a or the refundable amount ($5,000 on the 2025 form; $5,280 using the 2027 figure). Line 11c adds the children together, and the total goes on line 13, then Form 1040 line 30.
6. Lines 14 to 18 take the rest as the nonrefundable credit, limited by the tax you owe (the Credit Limit Worksheet), with any unused amount carried forward.

Worked examples (our arithmetic)

Assumptions for the first table: one child, qualified adoption expenses of at least $18,250, no employer benefits, and the 2027 figures of $18,250, $273,680, a $40,000 divisor and a refundable amount of $5,280.

Reading the table. At $280,000 the reduction is $18,250 x 0.158 = $2,883.50, so the credit is $15,366.50. At $295,000 the reduction is $9,727.25. At $310,000 the reduction is $16,571.00 and the whole $1,679.00 left is refundable, because it is below $5,280. Each $1,000 of MAGI inside the band costs $456.25 of credit ($18,250 / 40).

The same $280,000 under 2026 figures. With a cap of $17,670 and a start of $265,080 the fraction is 0.373 and the credit is $11,079.09. With the 2027 figures it is $15,366.50, a difference of $4,287.41, which comes from moving the band up $8,600 and raising the cap $580. A household whose MAGI stays flat gets more credit in 2027 than it would have in 2026.

With employer help. A household at $280,000 pays $25,000 of qualified expenses and an employer program reimburses $10,000. The $10,000 is not a qualified expense for the credit, so the credit base is $15,000: $15,000 x (1 - 0.158) = $12,630. The employer exclusion is limited the same way: $10,000 x (1 - 0.158) = $8,420 is excluded and the other $1,580 is taxable. A reader would run Form 8839 Part III before Part II.

The refundable part: what changed and from which year

Before the 2025 law, the adoption credit was fully nonrefundable: it could only reduce tax owed, and any unused amount was carried forward. Rev. Proc. 2025-32, section 2.02, says Section 70402 of the OBBBA “adds § 23(a)(4) which provides that so much of the credit allowed under § 23(a)(1) as does not exceed $5,000 is treated as a refundable credit,” with the amount “adjusted for inflation for taxable years beginning after December 31, 2025.” The 2025 instructions apply it to 2025 returns: “Beginning in 2025, up to $5,000 of the adoption credit is refundable.” It is determined per child, so a household adopting two children can have two refundable amounts.

So the refundable amount was up to $5,000 in 2025, is $5,120 for 2026 and $5,280 for 2027. For a household with MAGI inside the band the refundable part is the smaller of the reduced credit and that amount, which is why it falls below the cap only near the top of the band (see $310,000 above). The refundable credit goes on Form 1040 line 30.

The carryforward

The part of the credit that is not refundable can be used only against tax owed. The instructions put it this way: if line 16 is more than the Credit Limit Worksheet result, you “may have an unused nonrefundable credit to carry forward to the next 5 years or until used, whichever comes first.” They add that a carryforward “can only be a nonrefundable credit.” Their example: $20,000 of expenses, a $17,280 cap, $5,000 refundable, $10,000 used as nonrefundable, and $2,280 carried forward; the remaining $2,720 may never be claimed. A household in the $250,000 to $320,000 range often has enough tax to use the full nonrefundable part, but the worksheet decides, not this page.

Credit or employer exclusion: no double benefit

The credit and the section 137 exclusion are the same size and share one income band, but they cannot use the same expenses. The instructions say you “can’t claim both a credit and exclusion for the same expenses.” Their Example 1: $10,000 of qualified adoption expenses, $4,000 reimbursed under a qualified adoption assistance program, so the maximum credit is $6,000. Example 4 adds the cap: $36,000 paid, $17,280 excluded, a credit limited to $17,280, and $1,440 that “may never be claimed as a credit or excluded from gross income.” The employer benefit shows in box 12 of Form W-2 with code T. For a child with special needs, the exclusion may be available even if no expenses were paid, if the employer has a written qualified adoption assistance program.

For the other 2027 figures around this one, such as brackets and the standard deduction, see our page on the 2027 tax brackets in Rev. Proc. 2026-35. The MAGI band for this credit is a different number from the bracket thresholds; the credit looks at MAGI, not taxable income.

What a reader can do with this

• Find your 2027 MAGI band before you plan the timing of income. The band is $273,680 to $313,680. A realized gain, a Roth conversion or a distribution from a fund can move MAGI by more than $40,000 in one year.
• Check which tax year the adoption expenses fall in. The Form 8839 instructions describe how expenses paid before an adoption is final are claimed in a later year, and how a foreign child is treated differently; those rules, not the calendar year of payment, decide the year of the credit.
• Ask the employer's benefits office whether a qualified adoption assistance program exists and what it reimburses. Reimbursed dollars cannot also be used for the credit.
• Keep the worksheet. If an unused nonrefundable credit is carried forward, the next year's Form 8839 needs the carryforward worksheet.

The decision, and who makes it. When a child's adoption becomes final, how expenses are split between the credit and an employer program, and how to manage MAGI around the band are questions for a CPA or enrolled agent who prepares your return. Nothing here is a recommendation. The Revenue Procedure applies the Code as it stands on its release date; Congress can change any of this.

This is analysis of public documents, not investment, legal or tax advice.

FAQ

Sources, read and saved on November 7, 2026: Internal Revenue Service, Rev. Proc. 2026-35 (sections 3.04 and 3.20), Rev. Proc. 2025-32 (sections 2.02, 4.04 and 4.18), and the 2025 Form 8839 and Instructions for Form 8839 (December 8, 2025). Worked examples are our arithmetic. This is analysis of public documents, not investment, legal or tax advice.