Can I Claim My Foster Child on My Tax Return?

Update: In a continuing effort to combat some of the confusion surrounding taxes and who can claim what and when, QPI Florida invited me to the Just In Time Webshow to discuss some Foster Parent Tax Tips (and some helpful tips for Adoptive Parents, as well).
 

So it’s that time of year and on every foster parent facebook group I belong to, this question is asked at least daily. Many, many, people will answer, but most of them are just repeating what they’ve been told and don’t actually know the tax code….

I don’t have the time or patience to keep reposting the answer and correcting misconceptions, so I’m only going to say this one more time.


Full disclosure: Yes, I am a practicing CPA. Yes, I would be happy to do your taxes; our firm’s minimum fee is $450. No, I won’t do it for free. No, I won’t double-check the mistakes made by H&R Blech. And no, I won’t help your cousin Danny figure out to claim his cats. My goal is to tell you the law, not how to get around it, but as with all internet advice, YMMV, please consult your tax preparer.


So…

Q: How long must my foster child live with me in order to be claimed on my tax return?
A: More than half the year, or more than half their life, if they were born during the tax year in question. Note that I didn’t say 6 months + 1 day, this is the most common misconception I’ve seen. There are 365 days/nights in a non-leap year, so more than half of a non-leap year would be 183 days/nights.

Key points:

  • The 183 days (184 for a leap year) need not be consecutive. 
  • A recent clarification for divorced/separated parent uses “night overs” as the measure of custody/residency. Therefore, the conservative approach would be to count nights rather than days.
  • If the child is temporarily away from your home – at camp, in the hospital, at a sleep-over, etc – but is still technically in your care, those nights count toward your total. 

EX: A foster child lives with you from January 1 through February 15 (45 nights), then goes to a relative placement for 5 months, but returns to your home on August 15 and stays through the end of the year (139 nights), as long as the other “qualifying child” tests are met, you may claim the child.

Q: So that’s it? If a child lives with me at least 183 nights, I can claim them?

A: Eh, not so fast. That’s the most misunderstood requirement, but it’s not the only one. The four tests for a qualifying child are:
  • Relationship: the child must be your child, stepchild, foster child, sibling, half-sibling, step-sibling or a descendant of any of these (i.e., your grandchild, niece or nephew).
    • A foster child is defined as an individual who is placed with you by an authorized placement agency or by court order.

      • In other words, if you take in your cousin’s kid (or a neighbor kid) out of the kindness of your heart, you fail the qualifying child relationship test.
  • Age: the child must be 
    • 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.
  • Residency: the child must have lived with you for more than half the year.
  • Support: the child must not have provided more than half of his or her own support. 
    • Note that board payments provided by state or county are considered support provided by the state or county, and NOT support provided by the child.
  • Joint Return: the child cannot file a joint return for the year.

 

Q: What if the child lived with me for 3/4 of the year, but was reunified or moved to a different placement before the end of the year?

A: It doesn’t matter where the child lived on 12/31. If the child was in your care for more than half the year, and meets the other qualifying child tests, he/she is YOUR qualifying child and no one else is eligible to claim them.
 
 

Q: What happens if I claim a child and the bio-parents (or another foster parent, or grandma, or Jacob Marley) also claim them?

A: If the qualifying child tests are met, no one else is eligible to claim the child. However, that doesn’t mean they won’t try. How you are affected if someone else claims the child depends on whether you or the other person files first.
  • A1: If you e-file your return, but someone else has already claimed the child, your e-file will be kicked back. This is a headache, but not a migraine.
    • Contact the agency who placed the child with you and ask them to provide documentation of the dates the child was in your care.
    • Make a copy of this documentation for your files.
    • Submit the documentation with a paper-filed return.
    • Wait FOREVER for your refund.
  • A2: If you file before whoever else tries to claim the child, their return will get kicked back and they will have to provide proof that they can claim the child. Obviously they can’t because no one else is eligible to claim your qualifying child.
    • However, it is possible that whoever tried to claim the child will attempt to convince the IRS to give them the exemption. If this happens, the IRS may request that you prove your right to claim the child. 

 

Q: My foster daughter was removed from her bio parents on May 1, spent 4 months in a different foster home and then came to my home on Sept 1 and stayed with me through the end of the year. Who gets to claim her?

A: Probably not you. If a child is not a qualifying child of anyone, he/she may be a qualifying relative for someone. However, due to the different support test, it is unlikely that a foster parent who fails the qualifying child residency test will meet the qualifying relative requirements. Therefore, qualifying relative is outside the scope of this post, but you can see the IRS explanation here.
 
 
Q: What information do I need to claim my foster child?
A: You’ll need the child’s name, social security number and birth date.
 
 

Q: Florida recently increased the foster care age limit to 21. Can I claim my 20-year-old foster son?

A: Maybe. If your foster son is a full-time student, and meets the other qualifying child tests, he is your qualifying child. If he is not a full-time student, you may still meet the qualifying relative requirements.
 
 

Q: So you’re saying that if my cousin’s child lives with me the whole year, I can’t claim them?

A: No. That’s not what I said. If you care for your cousin’s child without DCF or court involvement, the child is not your qualifying child. However, you may still meet the qualifying relative requirements.
 
 
Q: I’ve been using the same dry-cleaner/tax-preparer for years and she says I can claim any child that lived in my home for even one day.
A: Is there a question there? Are you asking what we’d charge to represent you in an audit? A lot.
 
 
Q: Earned Income Credit.
A: Yeah, I’m not going to get into that here. Here’s a link, but I recommend you talk to your tax preparer.
 
Q: Adoption Tax Credit.
A: This is a VERY heavily audited credit, and beyond the scope of this blog. PLEASE discuss this with a qualified tax preparer.
 
 
Q: I have always done my own taxes, and you are completely wrong.
A: Okay… Thanks so much for your valuable input. And yes, I’d like fries with that.
 
 

Additional disclaimer: I’ve tried to speak plain English, and not make this post a gobbledygook, textbook-ish, technical treatise, but, yes, I really talk like this. Please feel free to let me know in the comments if you need any terms clarified. You’re also welcome to ask additional questions in the comments, but understand that I can’t give  advice about your specific situation without a lot more details than you should be leaving in a public comment.

24 Comments

  1. Jennifer Porter

    We go through this every year at tax time… Trying to remember who we can claim and who we can’t! This is a great post

    Reply
  2. Jodie

    Thank you so much for this blog! Helped me alot today!!

    Reply
  3. Crazy with a Purpose

    Thank you so much for this article. I live in Montana, and right now the State as a whole is telling foster parents that they are not allowed to claim any foster children, unless they fill out IRS form 3-1 For determining support and in line 23 they include the stipend that the State provides. I see why that might interpret it that way, but I feel that the IRS example further down clarifies the issue. Do you have any suggestions for a more clear argument against the stance of the entire state agency? Thank you!

    Reply
  4. Jamie

    Tell them they need to re-read the rule. Several years ago it used to say that in order to claim a child, the taxpayer had to provide more than half of the child’s support. That’s where the stipend would come into play.

    The currently applicable support test for determining a qualifying child is whether THE CHILD provided over half of THEIR OWN support. Foster care stipends are not considered to be support provided by the child.

    Take them this link: http://www.irs.gov/publications/p501/ar02.html#en_US_2014_publink1000220914 and make them read example 2 under Support Test (To Be a Qualifying Child).

    If they continue to argue with something spelled out so clearly by the IRS, I’m not sure what to tell them….

    Here is a link to the Publication in .pdf form: http://www.irs.gov/file_source/pub/irs-pdf/p501.pdf

    Good luck.

    Reply
  5. Crazy with a Purpose

    Thanks so much for your quick reply. And I agree that it seems very clear. But unfortunately, they don’t see that yet. It makes no difference to our family, but I would love to see a state wide change in policy so that 100’s of foster families don’t lose out due to what the state tells them. Which right now is that you would have had to save every gas receipt, food receipt, ect and fill out this form, then maybe you could claim the children, but it’s too much work so no one ever does. Would there be tax professionals, additional IRS documents, ect that could show that the consensus for interpreting this code is what you have shared? As a foster parent, I know how sensitive and difficult it is to bring up any subject remotely involving money with the Dept. And I know most foster parents just won’t question, let alone argue with them about it. I would love to resolve it so those don’t have to. Thanks!

    Reply
  6. Jamie

    Maybe I wasn’t clear. The link I provided isn’t an interpretation – it’s an actual IRS publication – Publication 501: Exemptions, Standard Deduction, and Filing Information.

    I’ll copy/paste from the link I provided:

    “Example 2.

    You provided $3,000 toward your 10-year-old foster child’s support for the year. The state government provided $4,000, which is considered support provided by the state, not by the child. …. Your foster child did not provide more than half of her own support for the year….”

    If they are refusing to reread the document and see that the rule for qualifying child changed, I don’t see how I can help you.

    I can’t give you anything more authoritative than an IRS publication. If they won’t believe it directly from an IRS publication…. I don’t know what to tell you. Have you tried showing them the actual publication?

    Again, this isn’t MY interpretation of the code, this is taken directly from IRS Publication 501.

    ~~Duck Mommy

    Reply
  7. Larry in Kingman AZ

    If we claim the foster kiddos, do we have to claim the stipend as income? We do not receive any tax paperwork from the state.

    Reply
  8. Jamie

    Not unless you are considered a “professional foster parent” (you would know if you were and the agency would give you tax docs). The stipend is considered support provided by the state, basically child support, which is not taxable to the recipient.

    If anyone has told you that the stipend is taxable income, you need to consult a local tax preparer. But whether or not you claim the child has no bearing on whether the stipend is considered taxable income.

    Reply
  9. tmfchicago

    What if they lived with me for less than 6 months, but the other group home where they lived the rest of the year will not be claiming them?

    Reply
    1. Jamie Nestrick (Post author)

      If the child doesn’t hasn’t lived with you for at least 183 days, they don’t meet the qualifying child tests. You can check out the qualifying relative tests at the link above, but one of those is that you provided over half of the child’s support.

      Reply
  10. Norita Dean

    In the case of an adoptive placement with signed adoption placement agreement, if my child came to live with me on Dec 31st but had been in the same foster home for the past year it is my understanding that because of my adoptive placement agreement that this child is mine to claim. Just like if I had given birth to them on Dec. 31st. Is this information correct?

    Reply
    1. Jamie Nestrick (Post author)

      No, that is not correct. The exception to the time requirement only applies to children who were born or died in the tax year. In that case, the child can be claimed by whomever the child lived with for over half of the time to child was alive in the year.

      In the case of your adopted child, the child was alive the entire year, and therefore a qualified dependent of whomever he/she lived with for more than half the year – the foster parents.

      Reply
  11. Audrey Kapuscinski

    Hey Jamie, I just discovered your video and blog today, and want to ‘Thank you’ for all the info you supplied! I am a rather new foster mom, I have one 17 yr.old daughter, who has been with us since 9/15/15. I understand all the info you went over, that applies and does not apply to my situation, and have a question about claiming the expenses (and there are a lot of them!), that we have incurred and continue to incur on her behalf, daily! She is a joy to us but we forgot about the many ‘essentials’ a teenage girl MUST have! Can any of these be deducted, in any way? Our plan is to see her through graduation this June and college from there on.

    Reply
    1. Jamie Nestrick (Post author)

      Hi, Audrey. Thanks for reading. Obviously, I don’t know all the specific details of your tax situation, so all I can do is give you some broad information.

      So there are two cases where the answer is clear-cut:
      1. If you are in the trade or business of providing foster care, expenses for the care of your foster daughter are considered business expenses, and you would treat them as such.
      2. If you are expecting or hoping to adopt your foster daughter, you cannot deduct those expenses. They would be considered support your provided for her.

      If neither of these cases apply, it’s a little murkier, and I would be very careful about deducting any expenses, and strongly recommend that you contact a CPA who is knowledgeable about foster-care-related tax issues. That being said, the IRS says:

      If you aren’t in the trade or business of providing foster care and your unreimbursed out-of-pocket expenses in caring for a foster child were mainly to benefit an organization qualified to receive deductible charitable contributions, the expenses are deductible as charitable contributions but aren’t considered support you provided.

      And Publication 501 also states the following example:

      Example 1.

      Lauren, a foster child, lived with Mr. and Mrs. Smith for the last 3 months of the year. The Smiths cared for Lauren because they wanted to adopt her (although she had not been placed with them for adoption). They didn’t care for her as a trade or business or to benefit the agency that placed her in their home. The Smiths’ unreimbursed expenses aren’t deductible as charitable contributions but are considered support they provided for Lauren.

      Reply
  12. Pingback: The Foster Mom's Guide to Central Florida | Tax Tips for Foster & Adoptive Parents

  13. Bree Markle

    My foster daughter spent 10 nights with a friend of mine, while my family and I went out of state. My question is: Would my foster daughter be considered technically in my care and those nights count toward the overall time for the year? The friend was not a licensed foster parent at that time. It was approved with the agency I foster through under “normalcy”.

    Reply
    1. Jamie Nestrick (Post author)

      Hi, Bree. Thanks for reading. I believe those nights would count as nights she was in your care.

      Reply
  14. Jonathan Hicks

    Hey Jamie, I was wondering if form 8332 would work as far as claiming a foster child that has been a ward of the state and living in a group home since the time that they were removed from parental care. Basically could the group home sign the 8332 as TPR had been issued several years ago and the “parents” of the group home would have been able to claim the foster child as a dependent of theirs? That is if the adoptive parents are placed with the child prior to 12/31. Thank you for your advice.

    Reply
    1. Jamie Nestrick (Post author)

      No. Form 8332 is specifically for separated/divorced parents.

      Reply
  15. Anne

    Thank you so much for sharing your knowledge! Here is my situation. I am a CASA (court appointed special advocate) for 3 children. These 3 kids were placed with a relative caregiver from 6/15 to 12/20. (188 days) However, the mom had some overnight visits with the kids and therefore, the children spent more than half the year with her (when including the overnight visits). The kids are now reunified with mom and the relative caregivers are looking to claim the children for 2016. Children’s Services will give a letter to the relative caregivers confirming the placement of the kids from 6/15 to 12/20. I confirmed this with the case worker. Will this letter override the actual overnights with mom? Can you lend insight on how the IRS might interpret this situation?

    Reply
    1. Jamie Nestrick (Post author)

      Hi, Anne. Thanks for reading.

      Based on the information you’ve provided, I would say that it appears that Children’s Services considered the children to still be in the foster parents’ physical care even when having overnights with their mother, so I would expect it to be treated just like if they had spent the night at a grandparent’s or friend’s house, which would count the nights as in the foster parents’ care. Those nights would definitely not be counted toward nights in mom’s care since she did not have custody.

      I would be surprised if the IRS looked any further than the letter from Children’s Services, honestly, although, I can’t guarantee how an individual Revenue Agent would interpret the situation. Worst case scenario, though, the IRS would deny the dependent exemption, but there’s no reason to think there would be any associated penalty.

      Reply
  16. jacob macaulay

    Helpful analysis ! I learned a lot from the insight . Does someone know where I might acquire a fillable NY WCB C-3 version to fill in ?

    Reply
  17. moon

    very helpful thanks

    Reply
  18. Rebecca

    I’m an Enrolled Agent and laughed out loud at this.

    HR Blech, indeed.

    Reply

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