If you’re a foster parent, it can be confusing to try to figure out what tax breaks and advantages are available to you. Foster children are often not eligible for some of the same credits and deductions as biological or adopted children. But there are a couple of valuable tax breaks available.
First, let’s define who a foster child is: A foster child is a child placed with you by judgment, court order, or an authorized placement agency (state or local government organization). If the child has not been placed with you by the courts or a government agency, you can’t claim foster care tax breaks. But you may be eligible to claim the child as a dependent. Check out Who Can You Claim as a Dependent for more information.
Yes—there are two tax breaks specifically for foster parents.
First, any foster care payments you receive from a child placement agency, the state government, or your local government are considered nontaxable income. The money is for the support of the foster child and isn’t just going into your pocket, the way other income would.
Second, you may be able to deduct your unreimbursed foster care expenses as a charitable donation, if you itemize deductions. The expenses are deductible if the agency or organization who placed the child with you can receive charitable donations. If the agency can’t accept charitable donations, the unreimbursed expenses may qualify as support provided by you.
Adding a foster child to your tax return is the same process as for any other child when you file with Tax Office & Associates™. It’s just one of the ways we keep taxes simple. Don't hesitate to get started on your return today!