Raising kids isn’t cheap—and thankfully, the IRS seems to finally be acknowledging that (a little).
The 2025 tax law, part of the new “One Big Beautiful Bill,” brings some important updates to the tax credits that matter most to parents. Whether you're navigating daycare costs, claiming the Child Tax Credit, or welcoming an adopted child into your family, these changes are worth knowing.
1. Child Tax Credit Increases to $2,200 per Child
This is a modest $200 bump from last year’s limit, but it comes with a caveat.
While the full credit is now $2,200 per qualifying child, the refundable portion remains capped at $1,700. That means if your tax liability is already low, the extra $200 might not boost your refund—but it could reduce what you owe.
In short: More helpful for higher-liability households, less impactful for those who already receive full refunds.
2. Childcare Credit Increases to $1,500 per Child
If you're a working parent who pays for daycare, afterschool programs, or babysitters, this one’s for you.
The Child and Dependent Care Credit has been increased to:
- Cover 50% of qualified childcare expenses (up from 35%)
- Provide up to $1,500 per child, for a maximum of two children
That’s a potential $3,000 in tax credits for families juggling childcare for two kids—though yes, it’s still capped at two children regardless of how many you actually have.
3. Adoption Credit Becomes Partially Refundable
This is one of the most compassionate (and practical) changes in the bill.
For adoptive parents, the adoption tax credit is now refundable up to $5,000, meaning even families with no tax liability can receive real cash back from the IRS.
If you’ve recently adopted—or know someone who has—this is worth celebrating and planning around. It’s also great news for foster parents navigating the legal process to adopt a child in their care.
To all adoptive and foster families: You’re doing sacred work. May this provide some well-deserved financial relief.
Don't Leave These Credits on the Table
These updates may not grab headlines, but they can make a real impact—especially when combined with proactive planning. If you're unsure whether you qualify, or you want to make the most of your 2025 tax strategy while raising a family, let’s chat.
Email me at kim@kimberlybagleycpa.com or book a call with me here to walk through what these credits mean for you—and how to capture every dollar you deserve.