new foster parent in Maine

[GwendolynF]

Hi there, I am based in Maine, and I became a foster parent in June 2021 for a newborn who is still with me full-time. I did not acknowledge anything about foster parenting to my taxes for 2021. How should I reflect being a foster parent in my 2022 taxes: is anything needed around naming dependents, expenses, income from foster parenting, or anything else? And is there anything I should correct for 2021?

[Paul_W1]

Hi Gwendolyn F,

These are great questions.  By the good luck, I have some foster care knowledge background but in CA.  Based upon the information, you did not claim the foster child?  I will assume no.  If no one is claiming, then you might consider claiming the child for tax purposes.  I have some questions, did you provide more than half of the support for the child, did the child live with you all year.  Also, we want to make sure that the biological parent(s) have not or are not claiming the child in 2021 and possibly as well in 2022.  I will provide you some links for claiming a child dependent.  See below.

https://www.irs.gov/faqs/filing-requirements-status-dependents/dependents#:~:text=To%20claim%20your%....

https://turbotax.intuit.com/tax-tips/family/rules-for-claiming-a-dependent-on-your-tax-return/L8LODb...

The second link has our turbo tax site and lays out very nicely the rules for claiming dependents.  Hopefully these are very helpful to you.  Your work as a foster parent is amazing.

[Paul_W1]

I should add, you might have to amend 2021 if no one has claimed the child.

[Hadley]

Foster care income is non-taxable.

If you have foster care expenses that are unreimbursed, they may be deductible as charitable gifts if the placement agency/organization can receive charitable donations.  Even if that is not the case, the unreimbursed foster care expenses may count as support when determining if the child is a dependent.

You can claim a foster child as a dependent as long as they are placed in your care by a placement agency, court order, or any government agency, are a US citizen, and meet the 5 criteria for qualifying child: Age, Relationship, Residency, Support, and Joint Return.

Age: Since the baby is under age 19 and younger than you, the age requirement is met.

Relationship: As long as you were ordered by a government agency or court to care for the child, you have passed the Relationship test.

Residency: The Residency requirement is met if the child was under your care and financial support for more than half of the year (pretty straightforward for you in 2022).  For 2021, the year the baby was born, you may treat the baby as having lived with you for more than half of 2021 if your main home was the child’s main home for more than half of the time he or she was alive in 2021.

Support: To meet the Support test the child cannot provide more than half of her support for the period in question. (Note: Any money you receive from the state for the child is considered provided by the state, not the child.)

Joint Return: The Joint Return test is not applicable to a new born. The requirement is met.

You will have to supply the baby's name, date of birth, and social security number or ITIN, as you would for any child you claim.  You enter this information in the My Info interview portion of TurboTax when asked if you have any children, and then as you proceed through the interview questions, TurboTax will know to prompt you for child-related tax credits and deductions. 

For 2021, you should be able to go back and amend to add the baby if s/he is a qualifying child.

[mikafeed58]

Foster children can be viewed as the same as biological children for tax purposes as long as the child was placed with you by an authorized placement agency or by Judgment, decree or other court order. Obviously there are tax benefits to being able to claim your foster child as a dependent...such the Child Tax Credit and the Earned Income Tax Credit. 

As for your 2021 tax return, it most likely will be beneficial for you to amend if the child lived in your home more than 1/2 of the year (183 Days).

IRS Publication 503 is a helpful resource:

https://www.irs.gov/publications/p503

[Opus 17]

There's some stuff missing from the expert's answers.

First, as stated, a foster parent is in the same legal position to claim a dependent as a biological parent, but only if the placement was by a court or agency authorized by the state.  If it was a private placement, it may not qualify.

Second, you need the child's SSN to claim the $2000 child credit for a dependent.  Without the SSN, you can claim a $500 credit for "other dependent."

Third, for 2021, if the child was born in 2021, it is not necessary for the child to live in your home more than 183 nights, only that they live in your home more than half the nights of the year since their birth.  You can amend your 2021 return to claim the dependent, if you choose.  For 2021, you would qualify for up to a $3600 child tax credit if you have the child's SSN, or $500 other dependent credit with no SSN.