There are special tax benefits available for foster parents, which you must be well aware of. It is important for you to understand that you do not have to be a relative of the children to become a foster parent, or for that matter, to qualify for the tax benefits available under this arrangement.

There are over half a million kids in America who are living under non-relative foster families. If you have also opened your home for homeless children and are providing all kinds of support to them, you must keep in mind the following things while you are filing your tax returns.

Tax Tips For Foster Parents

Identify Whether The Child Can Be Claimed As a Dependent

You can claim the foster child as a dependent in your tax filing only if you meet the following qualifying criteria.

- The child is living with you in your home for at least the last 6 months.
- The child is not working and earning to fulfill his or her financial needs. Even if they are working, they must not be earning enough to cover more than 50% of their own financial support.
- The age of the child is less than 19 by the end of the tax year.
- You must also have documented proof to show that the child in question is your legal foster child.
- There are certain other criteria also, such as about citizenship, return type and dependency.

Dependent Exemption

As per the tax laws for foster parents in the United States of America, you can currently deduct up to $3650 per child from your taxes. However, it is also very important for you to keep in mind that government or foster care agencies often provide foster care payments to such parents throughout the year that include specialized care payments, cost of care reimbursements and food stamps. If you are receiving those payments, you will obviously not be eligible to claim tax deductions for the expenses covered by that fund. If you do it, you are very much likely to face a tax audit.

Certificate From An Authorized Placement Agency

In order to claim a child as a dependent foster child in your tax return filings, you must attach a legal document to prove that it was a government authorized foster children placement agency that placed the child in your household. If it was a private agency, you will have to attach documents to prove that the agency was licensed by the state and that they were running their operations as a non profit organization.

However, in most cases, foster children are placed by the State Department Of Child And Family Services. In some cases, a child may be placed in your home as a part of a judicial action or because of a court order. In such cases, the court can also be treated as an authorized placement agency. Likewise, if the child in question is Native American and has been placed by an Indian Tribal Government Agency, you can claim him or her as a dependent foster child in your tax returns provided you meet all other qualifying criteria also.