IRS Says It Has Begun Automatic Refunds for 50,000+ Taxpayers With Adoption Credit Carryforwards: How the Credit Works

The IRS says it has begun sending automatic refunds to more than 50,000 taxpayers who carried an adoption tax credit forward from earlier years. The announcement shows how a change in how the rules are interpreted can affect credits carried forward for years. It applies only to a specific group of taxpayers, and this article can't say whether any particular reader is one of them.

On October 16, 2026, the IRS announced (news release IR-2026-123) that it has begun issuing automatic refunds to individuals who claimed an adoption tax credit carryforward from prior years.

Two ideas to know first

Refundable vs. nonrefundable. A nonrefundable credit can reduce your tax bill to zero but no further. A refundable credit can go beyond zero and come back as a refund. Under the 2025 budget law, the adoption credit became partly refundable: up to $5,000 per qualifying child, according to the IRS.

Carryforward. When a nonrefundable credit is larger than the tax it can offset in a given year, the unused portion can generally be carried forward to later years. For the adoption credit, the IRS says the unused amount can be carried forward for up to five years, after which it is forfeited.

What the IRS says is happening

Based on the IRS announcement:

• What changed. According to the IRS, Treasury clarified its interpretation of recent legislation so that, for tax year 2025 only, carryforwards from tax years 2020 through 2024 can increase the refundable portion of the 2025 adoption credit. The $5,000-per-qualifying-child limit still applies.
• Amended returns. The IRS says affected taxpayers should not need to file an amended return, though it says some accounts will be reviewed later (see below). Anyone unsure whether they are covered can check any IRS notice they receive or ask a tax professional.
• Timing. The IRS says refunds and adjustments began in late September 2026 and continue until complete. It expects most to be done by year-end, and says notices should generally arrive within 30 days of an adjustment. That is an IRS estimate, and individual cases may take longer or be reviewed.
• Who is handled automatically. Taxpayers who filed their 2025 return before April 15, 2026. Extension filers, and accounts with identity-theft indicators, freezes, dependency conflicts or other issues, will be reviewed later in 2026.
• What the IRS suggests. Review any notice, compare it with the 2025 return, and keep it with your tax records. The agency also suggests setting up an IRS Online Individual Account.

A note on the rules

The announcement itself says the treatment applies to tax year 2025 only. IRS positions can change, and nothing here should be relied on to predict a particular outcome.

The credit is claimed using Form 8839 (Qualified Adoption Expenses). Whether a particular household has a carryforward, or what its amount would be, depends on its own returns. This article can't say who will receive a refund, and not every reader with an adoption credit will.

A caution

Refund notices are also a favorite cover story for scammers. Verify any refund notice or contact through official IRS channels, such as your IRS Online Account, rather than through links or phone numbers in an unexpected message.

Where to look

The IRS announcement and its adoption credit pages explain the rules in full. For a specific household, the notice the IRS sends, the 2025 return and Form 8839 are the documents that show what happened, and a qualified tax professional can help interpret them.

This article is educational commentary on public tax developments, not personalized tax, legal, or investment advice.