Foster Child Care And Income Tax Breaks

Foster
Child

A foster child from an income tax point of view is not the same as a child or dependent in the traditional sense. Unlike a child or dependent that legally belongs to you either by birth or relation (e.g. your son, daughter, grandchild, etc.) or adoption, a foster child is placed with you by either a court order, judgement, or authorized placement agency (such as a state or local government organization). However, you can still claim a foster child as a dependent if they qualify as your dependent. The one exception to this is the Qualifying Widow(er) With Dependent Child filing status. You cannot claim a foster child as a dependent for this status.

Review the chart below to compare tax deductions and tax credits you may be able to claim on your 2019 Tax Return via eFile.com for having children/dependents or foster children.

Deduction/Credit

Child/Dependent or Foster Child

Foster Care Payments

A foster care payment is only related to having a foster child and if you received the payment from your state or local government or from a child placement agency. A foster care payment is nontaxable income because the payment is only for supporting the foster child. You do not have to pay taxes on the payment, so this is a valuable deduction for you as a foster parent.

Foster Care Expenses

If you itemize deductions, you may be able to deduct foster care expenses as a charitable donation if they are unreimbursed. The expenses must be out-of-pocket and used to clothe, feed, and care for the foster child. However, this only applies if the organization or agency who placed the child with you can receive charitable donations. If they cannot accept the donations, any unreimbursed expenses may qualify as support you provide. You may qualify to claim the foster child as a dependent as long as you provide at least half of the child's support and meet other requirements for claiming a dependent.

Claiming Dependent as Deduction

You can add a foster child to your return as a dependent in the same way you claim a child as a dependent. To do this, add the Child or Other Dependent screen in your eFile.com account and select "Foster Child" as the relationship. The eFile tax app will automatically add the dependent to your return if you qualify. Find out of your child or foster child qualifies as your dependent by using our free DEPENDucator tax tool.

Adoption Tax Credit

You can only claim this tax credit for adoption if you have an adopted child or dependent. It cannot be claimed for foster children.

Child Tax Credit

You can claim this tax credit if you have a child/dependent or a foster child. It will help you offset the many expenses of raising a child. Find out of you qualify for the credit by playing with our free KIDucator tax tool.

Child and Dependent Care Credit

This credit allows you to save taxes on child care expenses you paid for your child/dependent or foster child. Use our CAREucator tax tool to discover if you can claim the credit on your tax return.

Earned Income Tax Credit

This refundable tax credit supplements the income you earned through working, either for yourself (as self-employed) for for another person. Your credit amount increases when you claim one or more child or foster child as a dependent. To find out if you can claim the Earned Income Tax Credit, try out our EITCucator tax tool.

Please contact an eFile.com Taxpert if you have further questions or concerns about foster child-related tax breaks.

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