Tax Breaks for Foster Parents

What Is a Foster Parent?

The IRS defines a foster parent as a person who has had a child placed with them by an authorized placement agency or by a judgment, decree or court order. Informally taking in a family member or friend's child, even for an extended time, doesn't qualify as foster parenting for tax purposes.

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Can You Claim Foster Children on Your Taxes?

You can claim a foster child as a dependent on your tax return if they've lived with you for more than half the year, received a majority of their financial support from you and meet IRS eligibility standards for qualifying children.

To be claimed as a dependent, your foster child must be a U.S. citizen, resident alien or national, or a resident of Canada or Mexico. They can't be claimed as a dependent on more than one tax return and can't claim a dependent on their own tax return. They must also meet these basic IRS guidelines for qualifying children:

• Under age 19 (or 24 if they're a full-time student) at the end of the year, or any age if they're permanently disabled
• Younger than you or your spouse, if you're married filing jointly
• Lived with you for more than half the year
• Received more than half of their support from you (and not the agency that placed them)
• Did not file a joint tax return for the year
• Is not claimed as a dependent on anyone else's tax return

How Does Claiming a Dependent Change Your Taxes?

If you're single, claiming a dependent enables you to file as head of household, which provides a higher standard deduction. Claiming a foster child as your dependent also opens the door to a range of tax breaks for foster parents outlined below, including tax-exempt payments, child tax credits and a potential charity deduction.

What Tax Benefits Are Available to Foster Parents?

There are several tax benefits available to foster parents who qualify.

1. Tax-Exempt Support Payments

Support payments you receive for providing foster care are tax-exempt, whether you receive payments from the government or a child placement agency. You don't need to report these payments on your tax return or pay tax on them.

2. Child Tax Credit

The child tax credit provides a $2,200 per child tax credit that lowers your tax bill dollar for dollar. The child tax credit is partially refundable through the additional child tax credit (ACTC), which means you can receive a refund of up to $1,700 if your tax credit exceeds your taxes due.

You must have income of at least $2,500 to qualify for the ACTC. Additionally, your income can't exceed $200,000 ($400,000 for married couples filing jointly) to receive the full child tax credit, though you may be eligible for a partial credit.

3. Child and Dependent Care Credit

As a foster parent, you may qualify for a tax credit to help cover the costs of child care while you and your spouse work or look for work. The child and dependent care credit provides a credit equal to 20% to 35% of qualifying child care expenses up to $3,000 for one qualifying child or up to $6,000 for two or more children.

4. Earned Income Tax Credit

The earned income tax credit (EITC) provides tax credits for low- to moderate-income taxpayers and their families based on income, filing status and the size of your household. Adding a dependent to your family generally increases the amount of EITC you are entitled to claim. In 2026, maximum EITC taxpayers can claim are as follows:

• $8,231 with three or more qualifying children
• $7,316 with two qualifying children
• $4,427 with one qualifying child
• $664 with no qualifying children

5. American Opportunity Tax Credit

The American opportunity tax credit helps cover tuition and related expenses during the first four years of post-secondary education. If your foster child qualifies and you meet income guidelines, you may be eligible for up to $2,500 in tax credits.

6. Deductible Care Expenses

Some of your unreimbursed expenses for the care of a foster child may be deductible as a charitable contribution. To qualify, the organization you foster through must be a qualified charity and the expenses you incur to feed, clothe and house your foster child must be primarily for the benefit of the organization.

Tip: If you decide to adopt a child, you may be eligible for an adoption tax credit and other help with the considerable costs of adopting a child. For more information, check out the IRS adoption credit page.

Other Types of Financial Assistance for Foster Parents

Tax breaks aren't the only financial help that's available to foster families. Financial support may be available from the federal or state government, or from local agencies. Here is a quick list of resources that offer income assistance, medical benefits or other forms of financial help for families of foster children.

• Stipends: Monthly payments or reimbursements from government or private placement organizations help cover daily living expenses, including the cost of specialized care for foster children with special needs.
• Medical and dental coverage: Children in foster care may be eligible for Medicaid, which offers medical and dental coverage at a lower cost.
• Child care assistance: Some states offer voucher programs that subsidize the costs of day care and after-school care.
• Grants: Individual grants may help pay for education, special programs (like summer camps) or special accommodations and home modifications for special needs children.

If you're thinking about becoming a foster parent, talk to your caseworker or foster care agency about the kinds of financial assistance that might be available to you and your family. Becoming a foster parent is a major financial responsibility, but it's one you may not have to shoulder alone.

The Bottom Line

Tax benefits and other types of financial assistance can help foster parents take on the costs of raising children. If you plan to use these tax breaks and financial assistance programs, be prepared to keep detailed records of your expenses, reimbursements and support payments, so you can report your income and expenses accurately when needed.