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.
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.
- 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.