Filing taxes as a foster family


Well it’s tax time again.  Our first year as foster parents, we were a bit unsure how to file.

Do we claim the subsidy as income?

Can we claim our foster children as dependents?

Can we write off childcare expenses?

Thankfully our agency sent out letters answering some of our questions.

We were informed that we did not have to pay taxes on the child’s subsidy checks from the agency.  They also let us know that we could claim any of our foster kiddos who had been in our home longer than six months (or six months and one day).  Great news but even better news what that claiming the kiddos also meant that we could write off their childcare for that year. 

Now think back to January 2008.  If you felt a small earthquake it was probably me dancing around by my mailbox with the letter in hand.  Oh, don’t we all love stuff we can write off at tax time!

We have filed the last several years under those same guidelines and never had an issue.  Okay well, minus a minor hiccup in 2010.  The IRS had flagged our claim because four children, with four different last names that were also different children from the year before understandably triggered an alarm on their end.  Thanks to our wonderful CPA it was an easy clarification and the IRS was satisfied.

So fast-forward…   we are now in the 2011 tax season as we close out the past year. 

As a member of the NFPA I received a link to their 2011 Tax GuideI logged in I began to read through it.  Wow, was it full of great and easy to read information.  Thank you NFPA!

I learned several new things I wished I had known before.  What you say?  Well, did you know…

Parents who adopt children with special needs get the full $13,360 adoption tax credit, even if actual expenses were less.

Foster parents may be able to deduct some of the costs of being a foster parent as a charitable contribution.  Example of this would be, unreimbursed out-of-pocket expenses to feed, clothe, care for and transport the foster child.   Sure wish I had kept records and receipts to deduct under the charitable contribution deductions, but there is always next year.

This year also brought up a new question when preparing our taxes.

What if a foster child who is born during the last six months of the year is moved straight from the hospital to your home and remains there the rest of the tax year?  Can you claim them as if you would a biological child who was born at any point in the year?

Here’s what I understand thus far from what I can read on the IRS site

The qualifying child test states:

“The child (*eligible foster child) must have lived with you for more than half of the year.*2”

** An eligible foster child is an individual who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.  

“*2There are exceptions for temporary absences, children who were born or died during the year, children of divorced or separated parents or parents who live apart, and kidnapped children.”

So from what I’m reading, I believe our newest addition will qualify as a dependent.  Our CPA will be double-checking before filing that way but we’ve already asked her caseworker to file for her social security number so that we have it ready if we can in deed claim her as a dependent.

Thank goodness for our wonderful CPA and NFPA for their 2011 Foster Parent Tax Guide!  Taxes are one thing I’m glad to have someone else handle.


What lessons have your learned when filing taxes as a foster family?

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18 Responses to Filing taxes as a foster family

  1. Denver Laura says:

    Even though we had a kid living with us for 79% of the year, it wasn’t the same kid and therefore not deductible. We got paid for mileage in 2010 but not 2011 so we’re going to write that offf. We got reimbursed for clothing so we’re not duducting that.

    • Momma says:

      Yes, this was a first ive heard on mileage and clothing. We get reimbursed some but not all especially with new placements who typically come with no clothes. Also, weve bought a lot of stuff (car seats, baby beds, baby gear, etc) over the years I’m defiantly going to start saving receipts for those too.

  2. Irina Davis says:

    I’ve heard you can claim unrecovered expenses as charitable contributions, however I don’t know what organization you’re supposed to code it to. It’s not the salvation army… or Goodwill… so how do we code it?

    If anyone knows, I’d love to know.


  3. mary mathie says:

    Child living with foster parents for 3 years now. Foster parents checked out and okayed by dhs, but not placed by them. Placed with foster parents by biological parents. Is this child an eligible dependent on 1040?

    • Momma says:

      Hello Mary!
      I’m defiantly no tax expert, just sharing resources and things we’ve learned along the way. All kiddos placed with us have been through CPS so we don’t have experience with what your referring to. I’m sure that your CPA would be able to assist you with this. There is also great tax resources for foster parents on the National Foster Parent Association’s website. Hope you find the info your needing.

  4. Darlene says:

    We have 2 foster care children we will be able to claim at tax time 2012. I have kept track of mileage, day care and school expenses. My question is – can we claim dance classes, piano lessons, and sports expenses as a charitable contribution for the foster children?

    Thanks for any informaiton you can provide.

    • Momma says:

      I know daycare expenses you can but im not certine about the other items you listed. The most helpful tax info I have reviewed was through National Foster Parent association. They have a whole link for tax info on their site.

  5. Quinnesha says:

    Can i claim my godson on my taxes even though i just got temporary custody of him

    • Momma says:

      You would need to ask your tax professional about that. Assume it would have something to do with legal custody and time in your home but im not certine.

  6. Mina says:

    I had twins come into my home in September straight from the hospital. They did not go home until December. My question is: Can I claim them as dependents as if I had them? I know anytime you have a child during the year, they can be claimed as a dependent. Read some of your things and was wondering if they fall in that same category. Thanks

    • Momma says:

      Hey Mina! Our baby B came to us straight from the hospital Dec 2011. We claimed her just like we did our son who was born in Dec without any issues. Being that you brought them straight from the hospital I think you can but always double check with a tax professional first.

  7. John says:

    Eventhough the twins were placed in your home right from the hospital, because they went home before the end of the year, it appears this rule would not apply to you. And since the twins went home before the end of the tax year, and they were not in your home over half the year, it seems the parent(s) would be able to claim them as a dependents. I am familiar with this information, but I am not a tax expert and am not giving tax or legal advice; like Mamma, I suggest you consult a tax expert. Good Luck, and thanks for caring for these new born twins and preparing them to go home.

  8. leon curry says:

    Can you file foster kid if the agency paying you money to have them in your home

    • Momma says:

      Hey Leon!

      We have always been able to. You could start by asking your agency (most usually have a tax faq sheet for you) and then double check with your CPA.

  9. K says:


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