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.
