Tax Breaks for Foster Parents
Do Foster Parents Qualify for any Tax Breaks?
If you’ve ever researched the current tax code trying to find out if there were any tax advantages in being a foster parent, it had to be confusing at best. Normally, a foster child does not qualify for the same tax credits or deductions that you would receive for an adopted or a biological child. However, there are a couple of very important tax advantages that are available.
A definition of a foster child is someone who has been placed in your care by a court order or an authorized state or local government agency. If the child has not been placed with you under those rules, there are no tax breaks available. Under IRS regulations though, the child may be able to be claimed by you as a dependent. You can find out more at the IRS website, Who You Can Claim as a Dependent.
Assuming that the child has been placed with you by an authorized agency, foster parents are then eligible for the following tax breaks.
Payments for Foster Care
Any payments that you receive for foster care from an authorized agency or state or local government, are not taxable income. The reason for that is because these funds are to be used to support the foster child, and not for your own personal use, as other types of income would.
Expenses Used for Foster Care
Often times, the amount that you spend for support of the foster child exceeds the payment that you receive. In a situation like that, you may be able to claim that excess as a charitable contribution on your tax return. Be aware, though, that the agency that placed the child with you must qualify as an organization authorized to receive charitable donations as defined in IRS Publication 526.
When the agency isn’t authorized to receive charitable contributions, you can use the amount of your unreimbursed expenses as support that you provided. If the amount that you spend is at least half of the child’s total support, and you meet some other requirements, you may be able to claim the child as a dependent on your tax return.
Claiming a Foster Child as a Dependent
There really isn’t any difference in claiming a foster child as a dependent than your own biological child. Claiming the foster child when filing your taxes online with our online tax filing site, is easy. If you’ve met all of the requirements to claim the foster child, then on the dependent screen, simply check the box, foster child, enter the name and date of birth, and the program will take care of the rest.