Is Foster Care Income Taxable?

Note: The following is provided as general information and should not be considered legal or financial advice.

Taxes can be confusing even if you’re not a foster parent, but add stipends and volunteer expenses and a potentially changing mix of depends on your home … well, it’s enough to drive you crazy.

So, let’s start with this. As a foster parent, you receive a monthly stipend to cover the cost of care for the foster children placed in your home. It is not considered income, and because of that, it is not taxable. The amount of the stipend varies from state to state, and can also differ according to the child’s needs, but it covers basic living expenses – housing, food, clothing, allowance, transportation, etc.

In addition to the monthly stipend, you may be reimbursed for other expenses. This might include mileage reimbursement for transportation provided for the child, an emergency clothing allowance at the initial placement, all or a portion of daycare costs, or other expenses deemed necessary for the child’s health and well-being. These reimbursements are also not income and not taxable.

Your foster placement may be eligible to be claimed as a dependent, depending on the number of days the child has been in your care and other factors. In addition, other funds you spend in the care of your foster child, outside of the amount covered by your monthly stipend, may also be eligible for deduction as a charitable contribution.

Because of the intricacies involved in filing taxes as a foster parent, you may wish to consult a tax professional with a good understanding of both federal and state foster care and adoption tax law. The National Foster Parent Association also publishes a guide that you might find helpful.

For more information about adoption or foster care, go to Adoption.com.

 

Kristy O’Neal is mom to two sweet, funny, wonderful kids and works full-time in information technology. During her spare time, she likes to browse Pinterest and thrift stores, create things, and hang out with her kids. As a foster parent, Kristy cares about advocating for the needs of kids in foster care and supporting foster families. You can read her thoughts on these and many other topics at her blog.