Tax Breaks for Foster Parents

Do Foster Parents Qualify for any Tax Breaks?

Foster child tax breaksIf 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.

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Cheska J
Guest
Cheska J

Although I am not in this position, I know of someone who can benefit from this article. This would definitely benefit them as they have newly become foster parents! I didn’t know about this myself and I’m sure they would be glad to read on this. I’m happy to know that you cover topics like this as well. A great variety of financial advice in different aspects is really helpful.

Ella
Guest
Ella

I’ve been researching this topic as my husband and I have been thinking about fostering a child lately. It’s good to know that foster parents are eligible for a tax break. Taking care of a child can sometimes be draining both emotionally, physically and financially. Of course, the child’s wellbeing is always top priority, but it’s nice that parents can get some extra help from the government in the form of a tax break.

Adelia Ma'd
Guest

Ahhhh. A task break for foster parents. This is all I want to hear. My husband and I just got a court order to foster a child and we have been weighing the options. This tax break here is just enough to get us comfortable with the development and give us a go ahead.