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TAX INFORMATION FOR ADOPTIVE, FOSTER, AND KINSHIP FAMILIES

During this past year, you may have agreed to open your home to new children…perhaps you became a foster parent or continued fosterin;, adopted a child; or took over the legal custodial care of a relative’s child. A part of that responsibility includes financial obligations. The funds provided by the local, state, and federal governments are seldom sufficient to raise the child in a manner that provides for all of their basic needs let alone special needs. Knowing that, government does provide for certain tax benefits to help you afford to continue to provide for the children in your care. In this article, we will break down some of the basics of tax benefits for foster, adoption, and kinship care.

Adoption Tax Benefits:

NewFound Families-Virginia is proud to be a long-term member of the North American Council on Adoptable Children. (NACAC). The tax expert there is Josh Kroll and has actively advocated over the years for the most extensive tax credits possible for adoptive families.  At this time, you can attend a pre-recorded webinar on taxes and adoption for a fee of $15 (NACAC members) or $20 (non-members of NACAC). In addition, click on this link to learn more about tax benefits not only for 2016, but previous years as well. We consider NACAC the most thorough site for learning about adoption tax credits.

You may also want to visit this federal tax site regarding adoption tax credits.

https://www.irs.gov/taxtopics/tc607.html

 Here is a link to a FREE webinar on adoption tax credits/deductions.

Foster Care Tax Benefits:

Claiming a child on your taxes as a foster parent can be a little less straightforward than it is for adoption. Here are some important variables to keep in mind.

  1. As a foster parent you are PERMITTED to claim a child who has been in your care for longer than 6 months. This time period would be the evidence that you provided more than half of the cost of their care, since they were with you more than 6 months.

    1. Having stated that you should be aware of the following:

      1. to do so you must have the child’s social security number;
      2. the biological parent may not be aware that you are permitted to claim children that have been in your care for longer than 6 months and they may in fact claim the child. If they claim the child and you claim the child, the IRS will process whichever tax return is accepted by the IRS, first.
      3. IF, the biological parents did not have physical custody for greater than 6 months, then the foster parent who did have physical custody can appeal the denial of their tax return to the IRS. The appeal for reconsideration should include the evidence that the child was with the foster parent beyond 6 months. Such evidence could be court documents provided by the local department or the placement agreement with signature and date and copies of payments made by the local government for the care of the child.
  2. The foster care payments you receive for the care and support of a child in foster care is NOT considered income for purposes of your tax return.
  3. Learn more about claiming a child in foster care from the IRS.
  4. The Virginia tax code also indicates that if a child is in Permanent Foster Care, then foster parents can claim a $1000 tax deduction. Please click on this link to learn more.

 One note to foster parents: Local Department staff have been advised by the Virginia Department of Social Services that they may share social security numbers with foster parents for the purpose of tax benefits.

Kinship Care Tax Benefits:

Kinship care, full-time care provided to child by a relative (or person with a relative-like relationship) of the child, has many of the same tax benefits and parameters as foster care. A kinship care provider must have provided care for longer than 6 months during the calendar year. Here are the variable to keep in mind:

  1. As a kinship caregiver you are PERMITTED to claim a child who has been in your legal or full-time physical custody for longer than 6 months. This time period would be the test that you provided more than half of the cost of their care, since they were with you more than 6 months.
    1. Having stated that you should be aware of the following:
      1. to do so you must have the child’s social security number;
      2. the biological parent may not be aware that you are permitted to claim children in your care for longer than 6 months and they may in fact claim the child. If they claim the child and you claim the child, the IRS will accept whichever tax return is accepted by the IRS, first.
      3. IF, the biological parents did not have physical custody for greater than 6 months, then the kinship caregiver who did have physical or legal custody can appeal the denial of their tax return to the IRS. The appeal for reconsideration should include the evidence that the child was with the kinship caregiver beyond 6 months: such evidence could be court documents or any documentation that may have been signed by the parents.
  2. If you receive TANF payments for the child, The TANF payments you receive for the care and support of a child in your care is, generally, NOT considered income for purposes of your tax return. Please see this IRS link.

NewFound Families-Virginia provides this as information to assist you in knowing the questions and procedures to familiarize yourself with as a resource parent. We are NOT tax accountants or attorneys and this article should not be considered legal or tax accounting advice. Please review your tax return with a qualified tax professional.

NewFound Families

Adoption, Foster, and Kinship Association
P.O.Box 85
Ashland, VA 23005
1-888-2FOSTER
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