The formulas
- Limit = lesser of benefits or expenses, up to $17,670 ($17,670 for a special needs child regardless of expenses)
- Phase-out fraction = (MAGI - $265,080) / $40,000, 0 to 1
- Exclusion = limit x (1 - fraction)
How it works
Rev. Proc. 2025-32 section 4.18 sets the 2026 Section 137 exclusion at $17,670 per child, with the same amount excludable for a special needs adoption. The exclusion phases out for modified AGI above $265,080 and ends at $305,080.
The exclusion and the adoption credit share the same dollar cap and phase-out, and the same expenses cannot be used for both. Track employer benefits and your own expenses separately so no dollar is claimed twice.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
Is the exclusion per child or per year?
Per child: $17,670 for 2026 under Section 137(b)(1).
Can I take the credit too?
Yes, for expenses not reimbursed by the employer, within the combined limit.
When is a foreign adoption eligible?
When the adoption becomes final.
Sources
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.