Details of Public Law 119-21, section 70402 , One Big Beautiful Bill Act

The provision modifies the adoption credit by allowing refundability of up to $5,000 of allowable adoption expenses paid or incurred by the taxpayer and excludes refunded adoption credits from credit amounts eligible to be carried forward for use in succeeding taxable years.

This provision provides that the credit amount eligible for refundability would be adjusted annually for inflation.

California does not conform to IRC section 23, relating to adoption expenses.

California has a standalone adoption credit, which allows a credit equal to 50 percent (not to exceed $2,500) of the cost of adopting a minor child who is an American citizen and is in the custody of a California public agency or a political subdivision of California. The credit is claimed in the taxable year in which the decree or order of adoption is entered, although qualifying costs paid or incurred in prior years can qualify for the credit.