Can I Claim an Exemption for Foster Children?
Can I Claim an Exemption for Foster Children?. Being a foster parent can be rewarding, and though the state or an agency may help with funds, you will always have more expenses than funding. Fortunately, the Internal Revenue Service (IRS) realizes that taking in a foster child is no different than providing for your own child, and they allow taxpayers to count foster children as dependents.
Children are typically placed in foster care if their parents can no longer care for them for any number of reasons. This can be a temporary or permanent situation, and some foster children may be eligible for adoption. Foster parents typically receive a small stipend to cover costs of caring for a child, but they must bear expenses beyond that.
Foster Child Exemption Requirements
The IRS provides an exemption for dependents who meet the relationship tests, and lists qualifying people as your child, stepchild, adopted child, foster child, grandchild, sibling or niece or nephew. To qualify for the exemption, a foster child must have been placed with you by an authorized placement agency, such as child services, a judgment, decree or some other order of a competent jurisdiction. You do not qualify for the exemption if you are taking care of a child of your own volition without legal authorization or sanction.
A foster child must be younger than you or your spouse if you file jointly; under age 19 at the end of the tax year; under age 24 at the end of the tax year if a full-time student; or permanently and totally disabled at any age, at any time during the year.
Residency and Support
The child must have lived with you for over half the year. The support test requires that you provided more than half of the child's support in the tax year for which you are filing. The payments you receive from the agency or state that placed the foster child with you are not considered support that was paid by the child and do not figure into the determination of the amount of support you contributed through the year. If the amount of support the state provides exceeds your expenses, you still meet the support test because the support was provided for the child, not by the child.