Foster Parents provide a home to homeless kids, and take care of all their necessities. Not everyone can qualify to become Foster Parents, and one needs to often prove with the help of financial statements that they are capable of taking care of the needs and wants of a foster child. But those who manage to qualify for the same and handle this well are definitely doing a good, noble job.
The government often appreciates this, and helps Foster Parents to avail some tax benefits. Contrary to a common belief, Foster Parents need not necessarily be relatives of the child. These can be completely non-related parents, and can still get the tax benefits.
If one gets a Foster Child at home, it is obvious that one has decided to take care of the upbringing of the child, and the child is dependent on the Foster Parent(s) for all his/ her wants and needs. However, this dependency needs to be proved or claimed in certain ways when filing tax returns.
The child has to meet some criteria, in order to be listed as ‘Dependent’ on one’s tax returns. This is possible when the child has been living in the foster parent’s home for at least six months, and is under the age of 19 years. Moreover, the child needs to have no source of income to support his/her expenses, or even if there are any sources, they can’t be more than 50% of the total financial support needed by the child.
The rules are different in each country, and also differ from person to person depending on how much the Foster Parents earn, and how much of it they are spending on the Foster Child. In some cases, the government, as well as foster care agencies provide support through care reimbursements, food stamps etc. The expenses covered under these benefits provided to the parents cannot be deducted under taxes. It is best to check with one’s Tax Consultant to find out more details. Sometimes, the rules also differ based on the Foster Child’s age, citizenship etc.
Paperwork and Proofs
The claims for tax benefits can only be done if the Foster Parents have a proper, legal certificate, stating that the Foster Child is living with them legally. For this, the foster care agency from where the child was taken needs to be a state authorized one, or it should be recognized under the state for doing this job as a Non-Profit Organization.
Sometimes, a Foster Child lands up in one’s home as result of a court order, in which case, the court can be considered as the legal authority, giving the permission to the Foster Parents to have the Foster Child in their home.
Unless one has all the paperwork done properly, they will not be able to claim the benefits of tax deductions, as there would be no way of proving that the child is dependent on his/her Foster Parents. Taking the help of Legal Advisors is the best thing to do in such cases.
About the Author: James Hopes has always been interested in the field of finance. He runs a website www.HowToTradeCommodities.co.uk, via which he helps provide healthy financial tips.