Tax credit updates under the OBBBA

Under the One Big Beautiful Bill Act (OBBBA) enacted July 4, 2025, several changes benefit taxpayers who expect refunds due to having qualified dependents. The most impactful updates for 2025 are to the Child Tax Credit and the Adoption Credit, including expanded refundability and clarifications that can increase cash refunds for eligible families. Key dependent eligibility rules remain in place and must be met to claim these benefits.

Child Tax Credit (CTC) updates for 2025

• The enhanced Child Tax Credit structure was made permanent and set at up to $2,200 per qualifying child for tax year 2025, with inflation indexing to the credit amount beginning for taxable years after 2025. The existing income phaseout thresholds of $400,000 (joint) and $200,000 (others) continue to apply, and the Social Security number requirement for both taxpayer and child remains. These OBBBA changes are reflected in IRS annual procedures for 2026 and beyond, confirming the 2025 amount and permanent status of the enhanced framework.

  

  
  

• For 2025, the refundable portion (Additional Child Tax Credit) can provide a cash refund of up to $1,400 per qualifying child (subject to earned income and other limits), helping many families receive money back even if they have little or no tax liability. The IRS confirms these figures and eligibility basics (e.g., SSN issued by the return due date and age/relationship/residency tests) on its Child Tax Credit page.

• OBBBA’s 2025 confirmation of enhanced CTC terms is detailed in the IRS revenue procedure, which states the increased and expanded CTC rules (under § 24(h)) are now permanent and the $2,200 amount applies for 2025, with inflation adjustments beginning after 2025.

Adoption Credit: new refundable portion and broader special needs

• Starting in 2025, up to $5,000 of the adoption credit is refundable. This change allows eligible adoptive parents to receive cash refunds even if they owe little or no tax, significantly improving the financial benefit versus prior years. The statutory language now explicitly provides for this refundable portion and its inflation indexing beginning after 2025.

• OBBBA also clarified that “special needs” determinations can be made by a State or Indian tribal government, expanding access to the full adoption credit in applicable cases irrespective of actual expenses (for finalized special needs adoptions). This helps more families with adoptive dependents qualify for substantial credits and potentially refunds.

• Carryforward rules remain, but were conformed to reflect the new refundable portion (i.e., nonrefundable amounts can carry forward while the refundable portion can be paid out). The IRS confirms how the 2025 adoption credit framework is implemented and adjusted for inflation beginning after 2025.

Dependent eligibility reminders (to substantiate credits)

• To claim dependent-related credits (CTC/ACTC, adoption credit), your dependent must meet IRS defined tests (relationship, age, residency, support, joint return limits, and citizenship/residency). The IRS provides a current overview of these tests to help ensure proper claims and refunds for qualified dependents .

Where to find the official OBBBA changes

https://www.irs.gov/pub/irs-drop/rp-25-32.pdf

• The IRS’s 2025 revenue procedure catalogs OBBBA-driven updates and confirms the enhanced Child Tax Credit for 2025 and the new refundable adoption credit portion beginning 2025.

• The consolidated OBBBA reference confirms these statutory changes and permanent CTC framework that apply beginning in 2025.

In short, for 2025 returns, families with qualified dependents may see larger refunds due to the permanent, enhanced Child Tax Credit framework (up to $2,200 per child with up to $1,400 refundable) and the new refundable portion of the Adoption Credit (up to $5,000), provided they meet all applicable eligibility requirements and identification rules.