Foster Child Expenses

[Justmefromstrout]

Do to an unplanned event, our local county child protective services contacted us and asked us to be foster parents for our grand niece. 

We have several questions that arise from this

1. We have been asked to provide transportation for the child and also to attend various meetings and trainings. This mileage is deductible at $0.14 per mile? If so, where to enter it?

2. We had expenses that were directly tied to obtaining the child care license that they required. (Background checks, fire extinguishers and so forth.) These are deductible? If so, where to enter that?

3. We would not have otherwise spent money on refinishing a room where the child could be in a safer environment in our house. This was strictly done to provide the safer environment. Are any of these expenses deductible and if so, where to enter them?

4. Would any of the other expenses like uncovered food, clothing and so forth be deductible? 

5. We do get paid by the county to take care of the child so any added expenses might be subject to those beyond the value of their payment? Or not?

6. Is there anything else we should be looking for in the way of deductions or potential tax savings that is now listed here?

Thank you

[xmasbaby0]

Sorry---no you cannot deduct expenses for clothing, furnishing the room, obtaining a license, etc. on your federal return.  There is no place to enter any of that.   You do not say how long the child lived with you.   If the child was with you for at least half of 2021 then you get to claim the child as a dependent and receive the child tax credit and the 3rd EIP payment.

IRS interview to help determine who can be claimed:

https://www.irs.gov/help/ita/who-can-i-claim-as-a-dependent

https://ttlc.intuit.com/questions/3113432-who-can-i-claim-as-my-dependent  

You can claim Foster children as a dependents as long as they are placed in your care by a placement agency, court order, or any government agency.  The biological parents would fail the "support" and "Residency" tests.

Five tests must be met for a child to be your qualifying child. The five tests are:

1. Relationship
2. Age
3. Residency
4. Support
5. Joint return

In your case as long as you were ordered by a government agency to care for the child(ren) you have passed the Relationship test, 

The Age requirements are as follows

• Under age 19 at the end of the year and younger than you (or your spouse, if filing jointly),
• A student under age 24 at the end of the year and younger than you (or your spouse, if filing jointly), or
• Permanently and totally disabled at any time during the year, regardless of age.

[Justmefromstrout]

Actually this is a placement as the result of a court order.

We are not trying to claim the child as a dependent, rather that these costs were incurred to benefit the County Child Protective Services and would probably be considered a charitable contribution provided that they confirm their charitable organization status.

IF this could end up as a charitable contribution, then it all goes under charity?

[xmasbaby0]

What?   Why are you not trying to claim the child as a dependent?    Claiming it as a charity donation will likely yield next to nothing as a tax break.   Charity donations have no effect at all unless you have enough donations and other itemized deductions like mortgage interest, property tax, etc. to exceed your standard deduction.

[Justmefromstrout]

The child was not in residence long enough to be claimed as a dependent. 

We do have a lot of itemized deductions in general. Have had for years. 

Just trying to get what we can. Lemonade out of lemons...

[xmasbaby0]

Someone else might have a different take on this----but I think you will  not get very far with trying to claim a charitable donation for this situation.   You did not really donate to a charity when you purchased furniture, clothing or food---you purchased those things for a specific child, and you drove to those various meetings, etc. on behalf of that specific child.    I do not think any of that will meet the requirement to be considered a donation to a charity.   

What you are doing is commendable---you are providing a home for a child in need.   If you continue to do so throughout 2022, then you will be able to claim the child as a dependent and get the child-related credits for claiming a dependent.

@Hal_Al  ?    @Opus 17   ?

[Hal_Al]

Poster has apparently already done their homework:

        " you may be able to deduct your unreimbursed foster care expenses as a charitable donation. The expenses are deductible if the agency or organization that placed the child with you can receive charitable donations (so your local social services department would not qualify)"

Reference: https://www.1040.com/tax-guide/taxes-for-families/foster-parents/

[Opus 17 · Accepted solution]

@Hal_Al 

Governments are automatically qualified to accept tax-deductible donations.  From IRS publication 526.

Generally, only the following types of organizations can be qualified organizations.

5. The United States or any state, the District of Columbia, a U.S. possession (including Puerto Rico), a political subdivision of a state or U.S. possession, or an Indian tribal government or any of its subdivisions that perform substantial government functions. (Your contribution to this type of organization is deductible only if it is to be used solely for public purposes.)

@Justmefromstrout 

I think you are on shaky ground because this is not an unrelated person, but a relative.  If audited, the examiner may decide that you were not taking the foster child to benefit the placement agency, which is what is required by the regulations.  I don't think we can make further suggestions, the risk is up to you.  Most people aren't audited.  You may want to get a professional opinion.  

From IRS publication 526,

Foster parents.

You may be able to deduct as a charitable contribution some of the costs of being a foster parent (foster care provider) if you have no profit motive in providing the foster care and aren't, in fact, making a profit. A qualified organization must select the individuals you take into your home for foster care.

You can deduct expenses that meet both of the following requirements.

1. They are unreimbursed out-of-pocket expenses to feed, clothe, and care for the foster child.

2. They are incurred primarily to benefit the qualified organization.

Unreimbursed expenses that you can't deduct as charitable contributions may be considered support provided by you in determining whether you can claim the foster child as a dependent. For details, see Pub. 501, Dependents, Standard Deduction, and Filing Information.