Tax Rules for Foster Children

Tax Rules for Foster Children. According to the Internal Revenue Service, foster children are the same as biological children for federal income tax purposes. This means that taxpayers who are caring for foster children are entitled to claim them as qualifying children for tax credits, dependent exemptions, and special filing statuses, as long as they are providing half of the children’s financial support during the year and the children are legal United States citizens.

Foster Children

Each state in the United States provides care for children that have been removed from their parents’ homes or given up for adoption. Taxpayers who want to care for these children on a temporary basis can do so through the foster parent program. This program places a child with a responsible adult or couple who promises to provide a home and support for the child for a set period. Foster parents receive financial assistance from the state to help care for their foster children.

Dependent Exemptions

Since the IRS treats a foster child as a biological child for tax purposes, parents can claim their foster children as eligible dependents as long as they meet the eligibility requirements. For each dependent on their tax return, taxpayers can deduct a specific amount from their gross income. As of the time of publication, the dependent exemption amount is $3,650 per person.

Head of Household Filing Status

Single foster parents may qualify to claim the Head of Household filing status on their tax return if they are caring for an eligible foster child. The Head of Household filing status allows taxpayers to claim a larger standard deduction than that given to single filers. As of the time of publication, the Head of Household filing status standard deduction is $8,400. To use this filing status, taxpayers must be unmarried and providing at least half of the financial support for one dependent child or more, including foster children.

Tax Credits

Foster children are also qualifying children for the purposes of tax credits such as the earned income tax credit, the child tax credit, and the child and dependent care credit. The child tax credit and the child and dependent care credit help taxpayers reduce their overall tax owed by deducting $1,000 for each eligible child in the home and by claiming child care expenses for each child. The earned income tax credit gives low-income parents a refundable credit based on the number of children in the home.


  • Internal Revenue Service: Publication 501 - Exemptions, Standard Deduction, and Filing Information
  • Internal Revenue Service: Form 1040 - U.S. Individual Income Tax Return
  • Internal Revenue Service; A Qualifying Child; January 2005
  • Internal Revenue Service: Instructions for Form 1040
  • Internal Revenue Service; Ten Things to Know About the Child and Dependent Care Credit; March 2011
  • Internal Revenue Service: Ten Facts to Know About the Child Tax Credit; February 2011
  • Internal Revenue Service: Earned Income Tax Credit (EITC) Questions and Answers