You don’t have to be a “licensed” care facility, but the child must have been placed in your home by a qualified state agency or court order. If this is true, then the following rules apply:
1. If the child is a newborn and lived in your home more than half the nights of the year since it was born, you can indicate they lived with you all year and were your foster child and you can claim them as a “qualifying child” dependent.
2. If the child is not a newborn, then you cannot claim them as a “qualifying child“ dependent because they did not live with you more than half the nights of the year. You can claim them as a “qualifying relative“ dependent, sometimes called an “other dependent“ if you paid more than half their total financial support for the year. If you paid less than half the total financial support, the only way you could claim them as a dependent is if you got a signed agreement from everyone who paid at least 10% of the child support, specifying that they will not claim the child and that you may claim the child.
For 2021, if the child remains in your home at least half the nights of the year, you can claim them as a qualifying child dependent.
However, if the child was not placed in your home by an authorized agency or court order, then you cannot claim the child as a foster child. You would list them in TurboTax as “someone else“ not related to you and not your foster child. This will only allow you to claim them as a qualifying relative or other dependent. For 2020, you can’t claim them as a dependent because they did not live in your home the entire year. (If the child is a newborn, you could only claim them as a dependent if they lived in your home for the entire remainder of year after coming home from the hospital.) For 2021, you can only claim them as a dependent if they live as a member of your household for the entire year, and you provide more than 50% of the total support. If support provided by the state is more than support provided by you, you would not be able to claim them as a dependent.
