This year, thousands of new parents in the United States could witness larger tax refunds. This is due to significant changes in the refundable portion of tax credits included in One, Big, Beautiful Bill (OBBB), signed by President Donald Trump in 2025.
The bill has made key revisions to multiple areas of tax law. Apart from the changes to overtime taxes as well as taxes on tips, the new legislation brings in big updates for new parents.
According to Newsweek, those parents who have adopted a child in 2025 might get higher refunds due to changes to the Adoption Tax Credit and the Child Tax Credit (CTC).
In fiscal year 2024, more than 46,000 children were adopted from the foster care system in the country, as per the official data from the National Council for Adoption. As of now, details regarding the fiscal year 2025 have not been released.
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Additionally, 1,172 children got adopted from other countries during fiscal year 2024, the State Department data said. Out of the total, half of these adoptions were from Bulgaria, Colombia, India and Taiwan.
For the first time in more than a decade, the legislation allows a portion of the Adoption Tax Credit to become refundable, as per Newsweek report.
This means, several households in the country might get up to $6,700 back for their tax refund when combining it with the refundable portion of the CTC. This gets applied even when they own little or no federal income tax.
Notably, the maximum Adoption Tax Credit for 2025 tax year stands at $17,280 per eligible child after adjusting annually for inflation. This credit is applied to qualified adoption expenses, such as court costs, legal fees, adoption agency fees as well as adoption-related travel.
Up to $5,000 of the credit remains available for refund for tax years 2025 and beyond. Any remaining portion of the credit more than $5,000 remains nonrefundable.
Eligibility For Adoption Tax Credit
The adopted child should be under the age of 18 or physically or mentally unable to care for themselves.
Parents must note that the credit is applied for all domestic, international, private and foster care adoptions. However, the same is not for adoptions of a spouse's child or to surrogate parenting arrangements.
On this, income limits still apply. Among the eligible expenses include reasonable and necessary adoption fees; court costs and legal fees; adoption related travel expenses; and other expenses related to the legal adoption.
The report further highlights that the Adoption Tax Credit is a one-time per adopted child credit that is tied to adoption expenses. On the other hand, the Child Tax Credit applies annually to eligible dependents and is not related to adoption costs.
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Understanding The Child Tax Credit Worth?
For the 2025 tax year, the CTC is up to $2,000 per qualifying child, From this, up to $1,700 is refundable as the Additional Child Tax Credit.
This credit is for taxpayers having children under age 17 meeting residency, relationship and citizenship requirements.
Overall, families qualifying for both refundable credits might get up to $5,000 from the refundable portion of the Adoption Tax Credit along with up to $1,700 from the refundable portion of the CTC.
In total, this makes it $6,700 in potential refundable credits.
For most of the taxpayers in the US, federal tax returns for the 2025 tax year are due on April 15, unless an extension is filed.
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